The yield on a 30-year U.S. Treasury security is 6.5%; the yield on a 2-year U.S. Treasury bond is 4.0%. This data:
A) Indicate the yield curve is downward sloping
B) Indicate the yield curve is flat since the risk premium needs to be added for longer maturities
C) Indicate the yield curve is upward sloping
D) Indicate that people expect inflation to decrease in the future

Question

Quizplus · Accepted Answer

The yield curve is upward sloping because the yield on the 30-year U.S. Treasury security is higher than the yield on the 2-year U.S. Treasury bond. This indicates that investors are demanding a higher yield for locking their money in for a longer time period, which is a typical result for an upward sloping yield curve.

The Yield on a 30-Year U