Most economists predict a rise in interest rates. If you agree with them, you should _____________.
Switch from high-duration to low-duration bonds.
Switch from low-duration to high-duration bonds.
Switch from high-grade to low-grade bonds.
Switch from low-coupon to high-coupon bonds.
Most economists predict a rise in interest rates. If you agree with them, you should:--
a) Switch from high duration to low duration bonds.
Most economists predict a rise in interest rates. If you agree with them, you should _____________....
Suppose you own a bond issued by X. that has a Modified duration of 16 years. Interest rates are currently 1.5% but you believe the Fed is about to decrease interest rates by 50 basis points (1 basis point = 0.0001) in order to stimulate the economy further. Your predicted percentage price change on this X bond is ________ A) -8.00% B) -5.62% C) 5.62% D) 8.00% 8.Market economists all predict a rise in interest rates. An astute bond manager...
One point on which most economists agree is that: More productive economies should not trade with less productive economies Government spending impedes economic growth International trade should be restricted to protect jobs in the United States Voluntary exchange creates value The current income tax rates are too high
You predict that interest rates are about to fall. Which bond will give you the highest capital gain? low coupon, long maturity O high coupon, short maturity high coupon, long maturity zero coupon, long maturity
QULUI All else the same, if interest rates fall, then 1. bond prices will rise II. coupon payments will fall III. the percentage price change for short-term bonds will be greater than for long-term bonds IV. the percentage price change for high coupon bonds will be smaller than for low coupon bonds I and II only I, II, and IV only 1, II and Ill only III and IV only I and IV only
You expect both the short term and long term rates of interest to rise. Explain which of the following two bonds will you buy? Bond ZWQ with a duration of 3 or ZQW with a duration of 30?
The Fed controls interest rates to either tighten or loosen the economy. When the Feds are needing to tighten the economy, they will raise the interest rates. When interest rates are changed, it sends a ripple effect through the entire financial market. When interest rates rise, cost of capital and borrowing increase. Consumers will borrow and spend less. This will lead to a slower economy and help to hedge inflation. However, the change in interest rates can affect the market...
You expect interest rates to decline and wish to capitalize on the anticipated changes in bond prices. To realize your maximum gain, all else constant, you should purchase _____bonds? a. short-term; low coupon b. short term;high coupon c long-term; zero coupon d long-term; low coupon e long-term; high coupon
Interest rates typically rise when the maturity date on existing bonds extends farther into the future. bond prices increase. the coupon payout on existing bonds increase. bond prices decrease.
Can you explain intuitively why the interest-rate risk is positively associated with maturity but negatively associated with coupon rate of the debt instrument that you hold? How does the interest-rate risk vary with the level of interest rates? For example, during the recession when market interest rates are low, does the overall level of interest-rate risk become higher or lower? Imagine that you’re managing a portfolio of long- and short-term bonds. If you predict a rise in interest rates, how...
Which of the following statements corresponds to a trade barrior? Most economists agree this is not a good idea when the economy is at full employment When unemployment is low, the opportunity cost of production becomes zero because resources are available that are otherwise not being utilized In this situation, a country must give up the chance to produce one good for another Mutual gains from this assume full employment Save and Continue DAHA repistered trademark of SOPHIA Learning LLC