QUESTION $10$

What effect does the interest rate risk premium have on the yield curve for securities of different maturities?

It adds an upward bias to the slope of the yield curve, suggesting higher yields for longer maturities.

It causes the yield curve to slope downward, indicating lower yields for longer maturities.

It flattens the yield curve because the risk is perceived to be the same across all maturities.

It has no effect on the slope of the yield curve as market forces negate the premium.