Explanation

When the yield curve is upward sloping:

• Forward rate curve is the highest because forward rates represent the expected future spot rates, and in an upward-sloping curve, future rates are expected to be higher than current rates.

• Zero-coupon yield curve comes next because zero-coupon bonds have no reinvestment risk and their yields represent pure term structure rates.

• Coupon-bearing bond yield curve is the lowest because coupon bonds have reinvestment risk - the coupons received must be reinvested at potentially lower rates, which reduces their effective yield compared to zero-coupon bonds.

This relationship follows the mathematical relationship between spot rates, forward rates, and bond yields:

• Forward rates > Spot rates (zero-coupon yields) > Coupon bond yields

Therefore, option A correctly describes the hierarchy: forward rate yield curve > zero-coupon yield curve > coupon-bearing bond yield curve.