When interest rates are relatively low, investors generally expect interest rates to __________. Thus, investors prefer to hold __________ securities
A) fall; long-term
B) fall; short-term
C) rise; long-term
D) rise; short-term

Question

Quizplus · Accepted Answer

When interest rates are relatively low, investors generally expect them to rise in the future. To minimize the risk of holding lower-yielding securities when rates go up, they prefer short-term securities, which can be more quickly adjusted or reinvested at higher rates.

When Interest Rates Are Relatively Low, Investors Generally Expect Interest