If you expect interest rates to go up, you should buy a long-term bond now.

Question

Quizplus · Accepted Answer

If interest rates are expected to go up, the price of existing bonds will fall. This is because newer bonds will offer a higher interest rate, so investors will be less interested in buying existing bonds that offer a lower rate. Long-term bonds are especially vulnerable to price drops in this scenario because their maturity is further out, which means investors will need to wait longer to receive their principal and interest payments. Therefore, it would be better to hold off on buying long-term bonds until interest rates rise, at which point you can buy newer bonds offering a higher rate of return.

If You Expect Interest Rates to Go Up, You Should