For the Average Individual Investor,the Gap Between the Short-Term Interest

question 24

Multiple Choice

For the average individual investor,the gap between the short-term interest rate at which he can borrow and the rate at which he could invest in long-term bonds is likely to be

• A) small or even negative, making the profitability of an interest -carry-trade strategy unlikely.
• B) small or even negative, making the profitability of an interest -carry-trade strategy likely.
• C) high, making the profitability of an interest -carry-trade strategy unlikely.
• D) high, making the profitability of an interest -carry-trade strategy likely.

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Definitions:

Aggressive Strategy

An investment or business strategy aimed at achieving high returns by taking on a higher level of risk.

Conservative Strategy

An investment or management approach that prioritizes safety and risk avoidance, often by choosing stable and less volatile assets.

Expected Monetary Values

A financial concept that represents the average outcome when the future includes scenarios that may or may not happen.

Index Funds

Investment funds that replicate the performance of a specific index by holding all or a representative sample of the securities in the index.