What is typically true about the yield curve?

The yield curve is a graphical representation that illustrates the relationship between interest rates (or yields) of bonds of varying maturities, typically government bonds. The correct answer highlights that the yield curve reflects the interest rate spread for different maturities, which is fundamental in finance.

When plotted, the yield curve typically slopes upwards, indicating that longer-term bonds usually offer higher yields than shorter-term ones. This is due to various factors, including economic conditions and inflation expectations. A steeper yield curve suggests stronger economic growth expectations, while an inverted yield curve can indicate a forthcoming recession. Thus, the yield curve provides valuable insights into future interest rates and the overall economic outlook.

In contrast, other options do not accurately represent the nature of the yield curve. It is applicable to a variety of debt securities, not just corporate bonds, and does not imply that all bonds have the same return. Furthermore, the yield curve does not indicate that investment risk is irrelevant; quite the opposite, it reflects the risks associated with different maturities and helps investors understand how those risks interplay with expected returns.