University of Central Florida (UCF) GEB3006 Intro to Career Development and Financial Plannings Final Practice Exam 3

The correct choice is based on the relationship between interest rates and the treasury yield curve. The treasury yield curve represents the interest rates for U.S. government debt securities across various maturities. It serves as a benchmark for other interest rates in the economy, influencing the rates that individuals pay on mortgages, personal loans, and other types of credit.

When investors want to gauge the future economic conditions or expectations about inflation, they look at the yield curve. A normal upward-sloping curve suggests a healthy economy, where short-term debt has lower interest rates due to lower risk, while long-term debt carries higher rates to compensate for greater economic uncertainty over time. Borrowers and lenders typically use these rates when determining loan terms, hence influencing the interest individuals pay.

Understanding the treasury yield curve helps to clarify the wider implications of interest rate changes across the economy, making it a fundamental concept in financial planning and career development in finance.