Which of the following statements is correct?
A) The term structure of interest rates relates present value with the rate of return and the time to future value.
B) The term structure of interest rates separates present value from the rate of return and the time from future value.
C) The term structure of interest rates doubles present value with the rate of return and the time on future value.
D) The term structure of interest rates compounds present value with the rate of return and the time on future value.

Question

Quizplus · Accepted Answer

The term structure of interest rates, also known as the yield curve, shows the relationship between the interest rates (or yields) of bonds of the same credit quality but different maturity dates. It essentially relates the present value of investments to their future value by considering the rate of return and the time until maturity, making option A correct.

Which of the Following Statements Is Correct