Question

The yield curve

Select one:

A. shows how interest rates have changed over time.

B. graphically relates the yield (interest rate) of a bond to its maturity.

C. shows the relationship between bond prices and interest rates.

D. graphically relates the yield on a bond to its risk.

Answer 1

Yield Curve :

B. graphically relates the yield (interest rate) of a bond to its maturity

In finance, the yield curve is a curve showing several yields to maturity or interest rates across different contract lengths (2 month, 2 year, 20 year, etc. ...) for a similar debt contract. The curve shows the relation between the (level of the) interest rate (or cost of borrowing) and the time to maturity, known as the "term", of the debt for a given borrower in a given currency.