If interest rates are expected to decline,invest heavier in ________.

Question

Quizplus · Accepted Answer

When interest rates are expected to decline, long-term bonds tend to perform better as their prices increase the most with the fall of interest rates. This is because the longer maturity of the bonds means that they will be paying out their higher interest rate for a longer period of time, making them more valuable in a lower rate environment. Short-term bonds may also see price increases, but not as much as long-term bonds. Ignoring the opportunity to invest in bonds and holding onto cash may result in missed investment opportunities.

If Interest Rates Are Expected to Decline,invest Heavier in ________