Question

You are having a conversation with your friend Belinda about the upward-sloping yield curve that currently exists in the bond market. ​She explains this to you by saying that the upward slope to the yield curve is because longer-term bonds are less desirable than shorter-term bonds so that the issuers of longer term bonds must offer a higher interest rate as an incentive to attract buyers. Her observation means that she is a proponent of the __________ theory of interest rates.

Answer 1

Term Premium

Step-by-step explanation:

Her observation means that she is a proponent of the term premium theory of interest rates.