Business

Economics 101: Understanding the Term Structure of Interest Rates and the Yield Curve

Written by the MasterClass staff

Last updated: Sep 29, 2021 • 6 min read

When you invest your money into interest-bearing security, the amount of interest paid will vary depending on the length of the investment term. In other words, a savings bond with a one year term may pay a fairly low interest rate, but if you invest your money in a bond with a ten-year term, you may receive a higher rate of interest. When we discuss how the length of investment affects a security’s interest rate, we are talking about the security’s term structure.