An individual who holds marketable government securities now is likely to sell them and hold money instead if he believes that:

Question

Quizplus · Accepted Answer

If an individual holding marketable government securities believes that interest rates will soon rise far above present levels, it would make sense for them to sell those securities and hold money instead. This is because when interest rates rise, bond prices fall, meaning that holding those securities would result in a loss. By holding cash, they can later reinvest in securities at the higher interest rates, earning a greater return.

An Individual Who Holds Marketable Government Securities Now Is Likely