Everything Else Equal, If You Expect a Larger Interest Rate

question 41

Multiple Choice

Everything else equal, if you expect a larger interest rate increase than other market participants, you should ________.

• A)buy long-term bonds
• B)buy short-term bonds
• C)buy common shares
• D)buy preferred shares

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Definitions:

Salvage Value

The estimated resale value of an asset at the end of its useful life, used in calculating depreciation expenses.

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value over time due to use and wear and tear.

Units-Of-Production

A depreciation method that allocates expense based on the actual usage or production levels of an asset.

Double-Declining-Balance

A method of accelerated depreciation that doubles the straight-line depreciation rate, reducing the asset's book value more quickly in the early years of its life.