If a Yield Curve Is Upward Sloping, the Investment Strategy

question 4

Multiple Choice

If a yield curve is upward sloping, the investment strategy of buying long-term securities, then selling them after a short period (say, one year) is called

• A)riding the yield curve.
• B)liquidating the yield curve.
• C)segmenting the yield curve.
• D)a forward roll.
• E)None of these are correct.

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Definitions:

Interest Rates

Interest rates are the cost of borrowing money or the reward for saving, typically expressed as a percentage of the principal for a specified period.

S&P Rating

A credit rating given by Standard & Poor's, evaluating the creditworthiness of a borrower, ranging from AAA (excellent) to D (in default).

Investment Grade

A credit rating indicating a low risk of default, used to classify bonds that are considered safe investments.

BBB

A bond credit rating given to a medium credit quality debt instrument, indicating moderate risk.