What does an upward-sloping yield curve indicate regarding the relationship between short-term and long-term yields?
Explanation
An upward-sloping curve is the most common ('normal') shape, indicating higher compensation for holding longer-term debt.
Other questions
Which curve represents the yields of bonds trading at 100 percent of their face value?
In the context of forward rates, what does the notation '3y1y' typically represent?
Given the following spot rates: Year 1 = 4 percent, Year 2 = 5 percent. What is the value of a 2-year annual pay bond with a 6 percent coupon and a Face Value of 100?
If the spot curve is downward sloping (inverted), which of the following orderings is correct?
Calculate the 1-year forward rate, 1 year from now (1y1y), given the following spot rates: 1-year spot = 5 percent, 2-year spot = 6 percent.
What is the primary characteristic of a 'flat' yield curve regarding the relationship between Spot, Par, and Forward curves?
Spot rates are also commonly referred to as:
Calculate the price of a 3-year, 5% annual coupon bond (Face Value 100) using the following spot rates: Year 1 = 2%, Year 2 = 3%, Year 3 = 4%.
Which rate is considered a 'breakeven reinvestment rate'?
Given 1-year spot rate = 3% and 2-year spot rate = 4%. What is the implied 1-year forward rate 1 year from now?
If the yield curve is upward sloping, the forward curve will be:
The par rate is essentially a:
Which technique is used to derive zero-coupon rates from the prices of coupon-paying bonds?
Given: 1-year spot = 4%, 2-year spot = 5%, 3-year spot = 6%. Calculate the 3-year Par Rate.
Using the '2y1y' forward rate notation, how long is the forward period (tenor)?
Given 2-year spot rate = 8% and 5-year spot rate = 15%. What is the implied '2y3y' forward rate?
If the spot curve is inverted (downward sloping), which yield is the highest?
Why are par rates derived for hypothetical government bonds used for term structure analysis?
Calculate the price of a Zero-Coupon bond with 5 years maturity and Face Value 100, if the 5-year spot rate is 10%.
What is the relationship between the Spot Curve and the Par Curve when the yield curve is flat?
The 1y1y rate is 8% and the current 1-year spot rate is 4%. What is the approximate 2-year spot rate?
Which curve is typically constructed using on-the-run government bonds?
Calculate the value of a bond with annual coupons of 10%, 2 years maturity, Face Value 1000, using Spot rates: 1yr = 5%, 2yr = 6%.
If 1-year spot = 5% and 1y1y forward = 5%, what is the 2-year spot rate?
What is the discount factor for year 2 if the 2-year spot rate is 6%?
Which curve is typically 'below' the spot curve in an upward-sloping market?
Calculate the 2-year spot rate given: 1-year spot = 3%, 2-year par rate = 4%.
A '3y1y' forward rate refers to:
In a 'normal' market conditions scenario, the yield curve is:
Calculate the 1-year discount factor given a 1-year spot rate of 5%.
Given 3-year spot rate = 7% and 4-year spot rate = 8%. What is the implied 1-year forward rate 3 years from now (3y1y)?
Interpolation is used in yield curve construction to:
If the spot curve is flat at 5%, what is the 1-year Par Rate?
Which bond pricing method provides an arbitrage-free value?
What is the 3-year Spot Rate if the 1-year rate is 2%, 2-year rate is 3%, and a 3-year annual par bond (coupon=4%) is priced at 100?
If a yield curve is downward sloping, what is likely true about future interest rate expectations?
Calculate the implied 2-year forward rate 1 year from now (1y2y) given: 1-year spot = 3%, 3-year spot = 5%.
The term 'Maturity Effect' generally implies that for the same change in yield:
In the notation '0y1y', what does this rate essentially represent?
Which of the following describes the relationship between Spot (S) and Forward (F) rates when the yield curve is upward sloping?
Calculate the 2-year Par Rate given: 1-year spot = 5%, 2-year spot = 6%.
Which rate is used to discount cash flows when valuing a bond using forward rates?
Given 1y1y = 8%, and 1-year spot = 4%. The 2-year spot rate is approximately:
In a 'humped' yield curve scenario, intermediate-term yields are:
Given: 2-year spot = 6%, 2y1y = 8%. What is the 3-year spot rate?
Why do on-the-run government bonds typically trade at lower yields than off-the-run bonds?
If the forward curve is below the spot curve, the spot curve must be:
Calculate the 1-year spot rate if a 1-year par bond has a coupon of 5%.
Using spot rates 3% (1yr) and 4% (2yr), value a 2-year Zero Coupon Bond (FV 100).