Question

The speculative motive for holding bonds implies that investors may wish to hold bonds when interest rates are ____ with the hope of selling them when interest rates ____ (iClicker)

A) Low; are also low
B) High; are also high
C) Low; rise
D) High; fall

Answer 1

Investors may wish to hold bonds when interest rates are low with the hope of selling them when interest rates rise.

Step-by-step explanation:

The speculative motive for holding bonds implies that investors may wish to hold bonds when interest rates are low with the hope of selling them when interest rates rise.

When interest rates are low, bond prices are high since they offer higher yields compared to other investments. Investors can buy bonds at a lower price and sell them at a higher price when rates rise, earning a profit. This is known as the speculative motive for holding bonds.