Everything else equal, if you expect a larger interest rate increase than other market participants, you should ________.
A) buy long-term bonds
B) buy short-term bonds
C) buy common stocks
D) buy preferred stocks

Question

Quizplus · Accepted Answer

If you expect a larger interest rate increase than other market participants, you should buy short-term bonds. This is because short-term bonds have lower interest rate risk than long-term bonds, meaning that their prices will be less affected by a rise in interest rates. Buying common or preferred stocks is not necessarily related to interest rate expectations.

Everything Else Equal, If You Expect a Larger Interest Rate