A Treasury yield curve plots Treasury interest rates relative to:

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The question asks: A Treasury yield curve plots Treasury interest rates relative to:

Option 1: market rates. While Treasury yields are influenced by broader market conditions, the yield curve itself is not plotted against a generic market rate; instead, it focuses on a specific dimension of time to maturity, with each point representing a different maturity.

Option 2: comparable corporate bond rates. Corporate bond yields vary by credit risk and liquidity, and the yield curve for Treasuries deliberately avoids corporate credit risk as a reference. Therefore, plotting against corporate bond yields would mix different risk profiles, which is not how the Treasury yield curve is defined.

Option 3: inflation rates. Inflation expectations can influence yields, but the curve itself is not plotted directly against an inflation figure. Inflation is one of many factors that motion the level of yields, not the axis used for the curve representation.

Option 4: the risk-free rate. While Treasury yields are often considered risk-free within many frameworks, the yield curve is not plotted as a function of a risk-free rate benchmark across maturities; rather, it represents yields at different maturities for the same risk-free issuer.

Option 5: time to maturity. This is the dimension along which the Treasury yield curve is organized: each point on the curve corresponds to a specific maturity, from short-term bills to longer-term notes and bonds, illustrating how yields vary with investment horizon.

In summary, the yield curve’s defining axis is the maturity horizon, i.e., the time to maturity, which distinguishes it from other potential reference rates like market averages, corporate spreads, or inflation metrics. The other options describe related concepts or influences but do not define the axis over which the Treasury yield curve is plotted.

BUSFIN 3220 AU2025 (2110) Exam 2 - Requires Respondus LockDown Browser

A Treasury yield curve plots Treasury interest rates relative to:

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