Question 2 What must be the annual coupon rate for a $1000 face value bond with four years until maturity, a price of $983.44, and a yield to maturity of 8%? The graph earlier and almost any other yield curve’s graph you see would look ‘upward sloping.’ Upward Slope Yield Curve. c. The yield curve for corporate bonds may be upward sloping even if the Treasury yield curve is flat. D. long-maturity bonds increase in price when interest rates increase. This indicates that bonds with a longer maturity date (for example a 3-year bond compared to a … b. Yield curves are usually upward sloping asymptotically: the longer the maturity, the higher the yield, with diminishing marginal increases (that is, as one moves to the right, the curve flattens out).. It can also be said view the full answer. The yield curve is positive (upward sloping) because investor demands more money for locking up their money for a higher period. A normal, upward sloping yield curve is shown below. If you take a 2-year bank loan, you would have to pay a lower rate of interest than a 5-year … This is logical considering there is more risk associated with having money tied up for longer periods of time. The “Normal” yield curve has an upward slope. Clearly, in 2004, this makes sense because short-term interest rates are already at or near their lowest level in more than four decades. Graphical Presentation of Normal Yield Curve. C. short-maturity bonds yield less than long-maturity bonds. The yield curve is created below on a graph by plotting yield on the vertical axis and time to maturity on the horizontal axis. An upward sloping yield curve means that the yield rises as the maturiy of the security increases. The reason is simple – longer the tenor, the riskier it is. A 5-year T-bond would always yield less than a 10-year T-bond. An upward sloping yield curve suggests that financial markets expect short-term interest rates to rise in the future. Normal Yield Curve. Humped. d. The yield curve for stocks must be above that for bonds, but both yield curves must have the same slope. As an upward-sloping yield curve is normal, the arbitrage opportunities it offers are limited. There are two common explanations for upward sloping yield curves. In a growing economy, investors demand an additional premium (yield) for longer maturity bonds. A yield curve is simply the yield of each bond along a maturity spectrum that's plotted on a graph. This is how the yield curve looks when an economy is growing and investors are confident. a. It provides a clear, visual image of long-term versus short-term bonds at various points in time. A flattening of the yield curve usually occurs when there is a transition between the normal yield curve and the inverted yield curve. Previous question Next question Transcribed Image Text from this Question. No, an upward sloping yield curve means that the firm will get a lower interest rate if it uses long term financing. 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