An upward-sloping term structure of interest rates indicates: the real rate of r

Question

An upward-sloping term structure of interest rates indicates:

the real rate of return is lower for short-term bonds than for long-term bonds.

there is an indirect relationship between real interest rates and time to maturity.

there is an indirect relationship between nominal interest rates and time to maturity.

the nominal rate is declining as the real rate rises as the time to maturity increases.

the nominal rate is increasing even though the real rate is constant as the time to maturity increases.

Explanation / Answer

Answer: the real rate of return is lower for short-term bonds than for long-term bonds.

The X-axis represents the "Time to maturity" and Y-axis represents "Interest rate". An upward sloping curve means as the time to maturity increases, the interest rate also increases showing a direct relationship. Additionally, real interest rate is the nominal interest rate minus inflation rate.

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