A plot of the interest rates on default-free Canada bonds with different terms to maturity is called ________.
A) a risk-structure curve
B) a default-free curve
C) a yield curve
D) an interest-rate curve

Question

Quizplus · Accepted Answer

A yield curve is a graphical representation of the relationship between the interest rate and the time to maturity of debt securities. It shows the yield an investor is expecting to earn from bonds with different maturities. The default-free characteristic of the Canada bonds is implied by the fact that they are used in constructing the yield curve. The other options are not commonly used to describe a yield curve.

A Plot of the Interest Rates on Default-Free Canada Bonds