A. short-maturity bonds offer high coupon rates. B. long-maturity bonds are priced above par value. A yield curve is simply the yield of each bond along a maturity spectrum that's plotted on a graph. This indicates that bonds with a longer maturity date (for example a 3-year bond compared to a … An upward sloping yield curve suggests that financial markets expect short-term interest rates to rise in the future. In a growing economy, investors demand an additional premium (yield) for longer maturity bonds. C. short-maturity bonds yield less than long-maturity bonds. It provides a clear, visual image of long-term versus short-term bonds at various points in time. 5. a. D. long-maturity bonds increase in price when interest rates increase. There are two common explanations for upward sloping yield curves. An upward sloping yield curve means that the yield rises as the maturiy of the security increases. The yield curve is created below on a graph by plotting yield on the vertical axis and time to maturity on the horizontal axis. 11. The yield curve is positive (upward sloping) because investor demands more money for locking up their money for a higher period. Humped. If you take a 2-year bank loan, you would have to pay a lower rate of interest than a 5-year … An upward-sloping Treasury yield curve means that the market expects interest rates to decline in the future. Previous question Next question Transcribed Image Text from this Question. A normal, upward sloping yield curve is shown below. No, an upward sloping yield curve means that the firm will get a lower interest rate if it uses long term financing. week lecture chapter 15: the term structure of interest rate problem sets question under the expectations hypothesis, if the yield curve is upward-sloping, the Graphical Presentation of Normal Yield Curve. The graph earlier and almost any other yield curve’s graph you see would look ‘upward sloping.’ Upward Slope Yield Curve. Normal Yield Curve. The “Normal” yield curve has an upward slope. This means that the yield of a 10-year bond is essentially the same as that of a 30-year bond. This is logical considering there is more risk associated with having money tied up for longer periods of time. Question 2 What must be the annual coupon rate for a $1000 face value bond with four years until maturity, a price of $983.44, and a yield to maturity of 8%? This is how the yield curve looks when an economy is growing and investors are confident. As an upward-sloping yield curve is normal, the arbitrage opportunities it offers are limited. c. The yield curve for corporate bonds may be upward sloping even if the Treasury yield curve is flat. It can also be said view the full answer. b. A 5-year T-bond would always yield less than a 10-year T-bond. 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