When interest rates are relatively high, and the expansionary phase of the business cycle is peaking out, banks should take advantage of the yield curve by:
A) buying short-term securities
B) selling short-term securities
C) buying long-term securities
D) selling long-term securities

Question

Quizplus · Accepted Answer

When interest rates are high and expected to fall, banks should buy long-term securities to lock in higher yields before rates decrease, benefiting from capital gains as bond prices rise.

When Interest Rates Are Relatively High, and the Expansionary Phase