If Interest Rates Are Currently Very High and You Expect

question 46

Multiple Choice

If interest rates are currently very high and you expect them to go down soon, you will most likely

• A) sell your bonds now, while their yield is high and they are more marketable
• B) want to hold more money now to undertake more transactions since you expect economic activity to increase
• C) hold more money now, so you can buy more bonds later as soon as interest rates have dropped
• D) hold on to your bonds for now but expect to sell some of them later once interest rates have declined
• E) switch from holding long-term bonds to holding short-term bonds

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Definitions:

Standard Hours

The predetermined amount of time expected to complete a task or to produce a unit of output under normal conditions.

Standard Variable Overhead Rate

The predetermined rate at which variable overhead costs are expected to be incurred relative to a certain measure of activity, such as labor hours.

Direct Labour Hours

Direct Labour Hours represent the amount of time spent by workers directly involved in manufacturing a product or providing a service.