__________Strategy consists of buying a bond with maturity longer than the investment horizon (for investor) or buying a long-maturity bond with short-term funding through repo (for speculator).

Question

Quizplus · Accepted Answer

This strategy is commonly known as "riding the yield curve." The investor/speculator takes advantage of the difference in yield between short-term and long-term bonds. By buying a long-maturity bond with short-term funding, they are essentially betting that the yield curve will remain unchanged or flatten over time. As the short-term funding matures and is rolled over, the investor/speculator can continue to hold the long-maturity bond, realizing a profit as the yield declines with each roll. This strategy is only appropriate for experienced investors and speculators who understand the risks involved.

__________Strategy Consists of Buying a Bond with Maturity Longer Than