If You Expect Interest Rates to Go Up, You Should

question 45

True/False

If you expect interest rates to go up, you should sell a long-term bond now.
Selling means you are the one paying the interest, so locking in on a lower interest rate now would be best.

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Definitions:

Debt Financing

Raising capital through the sale of bonds, loans, or other notes to individuals or institutions.

Return on Assets

A financial ratio indicating how profitable a company is relative to its total assets.

Weighted Average Cost of Capital

An average representing the expected return on all of a company's securities, weighted according to the proportion each contributes to the total capital structure.

Systematic Risk

The risk inherent to the entire market or market segment, also known as market risk.