Question

If short-term interest rates are expected to fall, short-term ______ prices rise, so buy ______ and sell long-term ______.

A. Bond; short-term bonds; bonds.
B. Bond; long-term bonds; stocks.
C. Stock; short-term bonds; bonds.
D. Stock; stocks; bonds.

Answer 1

When short-term interest rates are expected to fall, the prices of short-term bonds rise, so it would be advisable to buy bonds and sell long-term stocks.

Step-by-step explanation:

When short-term interest rates are expected to fall, the prices of short-term bonds rise. So, it would be advisable to buy bonds and sell long-term stocks.