Question

If we observe that many investors are selling Bond A and buying a similar Bond B, this suggests that the expected returns on Multiple Choice

-Bond A will start falling
-Bond B will start rising
-Bond A were higher than those of Band
-B Bond A will start rising

Answer 1

When investors sell a bond and buy a similar bond, it suggests that the expected returns on Bond A will start falling and the expected returns on Bond B will start rising.

Step-by-step explanation:

If we observe that many investors are selling Bond A and buying a similar Bond B, this suggests that the expected returns on Bond A will start falling.

When investors are selling a bond, it typically indicates a decrease in demand and can lead to a decline in price and an increase in yield, resulting in lower expected returns. Conversely, when investors are buying a bond, it suggests an increase in demand, leading to higher prices and lower yields, indicating that expected returns on Bond B will start rising.