When is it best to sell bonds?
A) When interest rates are expected to rise,because this means bond prices will rise.
B) When interest rates are expected to fall,because this means bond prices will rise.
C) When interest rates are expected to rise,because this means bond prices will fall.
D) When interest rates are expected to fall,because this means bond prices will fall.

Question

Quizplus · Accepted Answer

When interest rates rise, new bonds will have higher yields, making existing bonds with lower yields less attractive to investors. This leads to a decrease in demand and a decrease in bond prices. Therefore, it is best to sell bonds before interest rates rise and bond prices fall.

When Is It Best to Sell Bonds