Illustrate the term structure of interest rates?
The term structure of interest rates:
The term to maturity affects the interest rate. Bonds along with identical risk may have various yields (interest rates) due to the difference into the time remaining to maturity. The yield curve plots the yields, that is, interest rates of bonds along with various maturities but similar risk. Generally the yield curve is constructed through government securities. Often these are referred to as the benchmark yield curve, like they are the basis for estimating other yields of the same maturity bonds. The yield curve can be as upward (long-term rates are above the short-term rates); it may be flat (as short- and long-term interest rates are similar); and inverted (as long-term interest rates are under short-term interest rates).