According to the expectations hypothesis, an upward-sloping yield curve implies that

A) interest rates are expected to remain stable in the future.
B) interest rates are expected to decline in the future.
C) interest rates are expected to increase in the future.
D) interest rates are expected to decline first, then increase.
E) interest rates are expected to increase first, then decrease.

Yield Curve

A graph showing the relationship between the yields of various debt securities of the same credit quality but different maturities.

Expectations Hypothesis

A theory in finance that explains the structure of interest rates by suggesting that the long-term rate can be determined by current and future expected short-term interest rates.

Interest Rates

Interest rates are the cost of borrowing money or the reward for saving, typically expressed as a percentage of the principal, which borrowers pay to lenders or financial institutions.