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Part 1 of 1 Question 16 of 25 their investment horizon If an investor wants to bet that interest rates will decrease, they sh
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Answer #1

Option C is correct

For suppose If interest rates declines by 1% and has 3 years duration, the bond prices goes up by 3%. In the same way, for a 5 years duration, with fall in the interest rates by 1%, the bond prices goes up by 5%. Hence, it best if you invest in the bonds which have duration longer than the horizon if interest rates declines.

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