What is the definition of the normal yield curve?

Answer by  HumptyDumpty (30)

The yield curve plots interest rates as a function of time to maturity. It is considered normal when it has an upwards slope, that is when long term interest rates are higher than near term rates.

Answer by  canospamo (87)

A yield curve plots the yield of debt instruments (bonds, Treasury bills, etc.) against the time to maturity. A normal yield curve has a positive slope all along the curve, meaning that yields always increase with maturity. Yield curves are constructed from instruments that have equal credit risk.

Answer by  Att4372 (1704)

In economics, the liquidity preference theory states that people prefer to lend short term rather than long. They will accept low interest for short term loans, but want higher interest to compensate them for tying up their money. The longer the term, the higher the rate for bonds and bank CDs. Normal means increasing yield with time.

Answer by  ethelbertIII (30)

A normal yield curve has a positive slope. This means that interest rates for longer maturity debt are higher than rates for shorter maturities. This is true because most of the time investors demand higher returns for taking on the risk of owning longer maturity debt.

Answer by  Jakecutter (1819)

This is an upward slope in statistics that plots the maturity of an investment, savings bond or even the interest of a bank loan, which the longer the slope the higher the debt of interest rates.