BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
James is a rational investor wishing to maximize his return over a 20-year period. The current yield curve is inverted with one-year rates at 5.00% and 20-year rates at 3.50%. James will invest in the lower-rate 20-year bonds if:
|
|
he thinks rates will fall in the future and locking in long-term rates today may provide the highest long-run average return.
|
|
|
he thinks rates will rise in the future and locking in long-term rates today may provide the lowest long-run average return.
|
|
|
he thinks rates will remain flat at 5% in the future and locking in long-term rates today will prevent him from appearing greedy to those without this investment opportunity.
|
|
|
he thinks rates will rise in the future and locking in long-term rates today may provide the highest long-run average return.
|
Explanation:
There is 1 question to complete.