If shorter-term securities have higher annualized yields than longer-term securities, the yield curve
A)is horizontal.
B)is upward sloping.
C)is downward sloping.
D)cannot be determined unless we know additional information (such as the level of market interest rates).

Question

Quizplus · Accepted Answer

When shorter-term securities have higher annualized yields than longer-term securities, it indicates that investors require a higher return for lending money in the short term than in the long term. This scenario leads to a yield curve that is downward sloping, as it shows interest rates decreasing with longer maturities.

If Shorter-Term Securities Have Higher Annualized Yields Than Longer-Term Securities