Definition of Yield Curve

the yield curve is the rate at which interest rates vary among investments of similar quality with different maturities. Longer term securities generally offer higher yields.

Applying "Yield Curve" to Securities Exams:

Investors will generally demand a higher level of return the longer their money is tied up. As a result a bond with a maturity of 10 years will usually carry a higher interest rate than a 5 year bond issued by the same company or government. This results in a positive sloped yield curve.

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