According to the liquidity premium view of the yield curve, most yield curves should have a ____ slope. Which choice below correctly fills in the blank in the preceding sentence?
A) Negative
B) Positive
C) Zero
D) Either positive or zero
E) The yield curve's slope is indeterminate according to the liquidity premium view

Question

Quizplus · Accepted Answer

The liquidity premium view suggests that longer-term bonds typically carry a higher interest rate to compensate for their greater risk, leading to a yield curve that is generally upward sloping or positive.

According to the Liquidity Premium View of the Yield Curve