Bond investors expecting interest rates to rise should shift their portfolios toward:
A)shorter term bonds.
B)longer term bonds.
C)higher quality bonds.
D)lower quality bonds.

Question

Quizplus · Accepted Answer

When interest rates rise, the prices of existing bonds fall. Shorter-term bonds are less sensitive to changes in interest rates than longer-term bonds, and therefore provide less risk to investors who expect interest rates to rise. Additionally, higher quality bonds (such as those with a higher credit rating) may also provide some protection against rising interest rates, but shorter-term bonds are generally considered the better choice in this scenario.

Bond Investors Expecting Interest Rates to Rise Should Shift Their