To exploit an expected decrease in interest rates, an investor would most likely

Question

Quizplus · Accepted Answer

When interest rates are expected to decrease, bond prices tend to increase as bond yields move inversely with bond prices. Therefore, buying Treasury bond futures (A) would be the most advantageous way to exploit the expected decrease in interest rates. Taking a long position in wheat futures (B) and buying S&P 500 Index futures (C) would not necessarily provide the same benefits because they are not directly affected by interest rate movements. Taking a short position in Treasury bond futures (D) would be counterproductive as it would lead to losses if interest rates decrease as expected.

To Exploit an Expected Decrease in Interest Rates, an Investor