On May 1, 2007, Joe Hill is considering one of the following newly issued 10-year AAA corporate bonds.

If interest rates are expected to rise, then Joe Hill should ________.

Question

On May 1, 2007, Joe Hill is considering one of the following newly issued 10-year AAA corporate bonds.

If interest rates are expected to rise, then Joe Hill should ________.

Quizplus · Accepted Answer

If interest rates are expected to rise, the value of existing bonds will fall. Asbury bond has a higher yield than Wildwood bond, which means it will be relatively less impacted by the rising interest rates, making it a better choice. Therefore, Joe Hill should prefer the Asbury bond to the Wildwood bond.

On May 1, 2007, Joe Hill Is Considering One of the Following