Pedro is trying to take advantage of the bond valuation relationships.He has figured out that when you expect interest rates to go up,buy ________ bonds and when you expect interest rates to go down,buy ________.

Question

Quizplus · Accepted Answer

When interest rates are expected to go up, buying very short-term bonds with long-term maturities that are not callable would be a good option as the investor would still receive interest payments at a low rate for a longer-term. When interest rates are expected to go down, buying bonds with very long-term maturities that are not callable would be a good option as the investor would lock in a high rate for a longer-term.

Pedro Is Trying to Take Advantage of the Bond Valuation