Q:

Below is an example of US Treasury yields for various maturities:
6 month: 2.25%
1 year: 2.37%
2 year: 3.15%
5 year: 5.02%
10 year: 5.24%
The curve indicated by these yields is called _____.
a) inverted
b) normal
c) reverse
d) flat
e) treasury

A:

The correct answer is b.
A normal yield curve chart shows long-term debt instruments having higher yields than short-term debt instruments. Sometimes referred to as positive yield curve. The reason it is "normal" is because you would expect slightly more risk for holding a bond for a longer period of time because there is great risk of default.
An inverted yield curve is when long-term debt instruments that have lower yields than short-term debt instruments.


Have a Financial Question?

RELATED FAQS

  1. What are the differences between a Chartered Financial Analyst (CFA) and a Certified ...

    Understand the differences between a Chartered Financial Analyst and a Certified Financial Planner. Learn how each approaches ...
  2. How do I become a Chartered Financial Analyst (CFA)?

    Understand what it means to hold the Chartered Financial Analyst designation. Learn how a candidate can work to become a ...
  3. What types of positions might a Chartered Financial Analyst (CFA) hold?

    Understand what types of positions a Chartered Financial Analyst can hold. Learn what is available to those who have only ...
  4. Who benefits the most from prepaid expenses?

    Learn who benefits most when expenses are prepaid. Individuals and businesses often make payments, such as rent or insurance, ...
RELATED TERMS
  1. Personal Financial Advisor

    Professionals who help individuals manage their finances by providing ...
  2. CFA Institute

    Formerly known as the Association for Investment Management and ...
  3. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly ...
  4. Security Analyst

    A financial professional who studies various industries and companies, ...

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!