6.7a What is the term structure of interest rates? What determines its shape?

The term structure of interest rates is the relationship between the yield on pure discount securities and
time to maturity. Its shape comes from expectations of future inflation rates.
6.7b What is the Treasury yield curve?
The Treasury yield curve depicts the relationship between the yields on Treasury coupon-paying
securities and time to maturity.
6.7c What are the six components that make up a bonds yield?
Bond yields are comprised of the real rate of interest, expected future inflation, interest-rate risk,
default risk, taxability, and lack of liquidity.