The normal shape of a yield curve is anupward slope, indicating that longer-term bonds offer higher yields than shorter-term bonds. This reflects the additional risk and time value of money associated with longer maturities.
A. Downward slope: This could describe a yield curve during unusual circumstances, such as a period of market uncertainty or deflation.
B. Inverted: An inverted yield curve, where shorter-term yields exceed longer-term yields, is a rare occurrence and often signals economic recession.
D. Humped: A humped curve is rare and occurs when intermediate-term yields exceed both short-term and long-term yields.
[Reference:CSC Volume 1, Chapter 7, "The Yield Curve – Normal Shape" discusses the upward-sloping yield curve as the standard in normal market conditions​., ]
Submit