Portfolio Managers Who Anticipate an Increase in Interest Rates Should

question 37

Multiple Choice

Portfolio managers who anticipate an increase in interest rates should

• A) Act to keep the duration constant.
• B) Decrease the portfolio duration.
• C) Increase the portfolio duration.
• D) Assume higher risk in the market.
• E) Invest in junk bonds.

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Definitions:

Labor Markets

The supply and demand for labor, where employers seek to hire workers and workers seek employment, influencing wages and working conditions.

Long-run Phillips Curve

A visual depiction illustrating that over an extended period, there exists no compromise between the rates of inflation and unemployment.

Long-run Aggregate Supply Curve

A curve that shows the relationship between the overall price level and the quantity of output that all firms in an economy are willing to produce, assuming all resources are fully employed.

Monetary Policy

The process by which the central bank or monetary authority of a country controls the supply of money, often targeting an inflation rate to ensure economic stability.