SIE Exam Question 196: Answer and Explanation

Question: 196

Which of the following statements is false regarding an upward-sloping yield curve?

  • A. It indicates that yields tend to increase with longer maturities.
  • B. The longer the time span until maturity, the greater potential for price volatility.
  • C. The longer the time span until maturity, the greater the risk for loss.
  • D. It indicates that short-term rates are higher than long-term rates.

Correct Answer: D

Explanation:

A normal, upward-sloping yield curve indicates that yields tend to increase with longer maturities. It also shows that the longer the time span until maturity, the greater potential for price volatility and risk for loss. It does not indicate that short-term rates are higher than long-term rates.

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