Question

Which of the following statements about term structure is(are) most correct?

A. Term structure is the relationship between interest rates and discount rates.

B. Term structure can be expressed either in tabular form or in graphical form.

C. A term structure graph is called a valuation graph.

D. The yield curve can have a variety of shapes, but the most common is downward sloping.

E. All of the above statements are correct.

Answer 1

Correct answer is option (B). Term structure can be expressed either in tabular form or in graphical form.

Explanation;

The term structure shows the relationship between interest rates or bond yields and different terms or maturities. Thus option (A) is incorrect.

The term structure of interest rates is also known as a yield curve, and it is not called a valuation graph thus option (C) is not correct.

The yield curve can have a variety of shapes, but the most common is upward sloping hence option (D) is also incorrect.

So on the basis of above explanation it is clear that only option (B) is most correct answer because term structure can be expressed either in tabular form or in graphical form.