A Client Tells You That He Strongly Believes That Interest

question 20

Essay

A client tells you that he strongly believes that interest rates in general will fall abruptly over the next six months.He asks you to recommend bonds for a portfolio to provide capital gains on the interest rate move.Generally,what would you suggest?What if he expected rates to rise?

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Definitions:

Net Income

The net earnings of a company once all costs and taxes are subtracted from the total income.

Indirect Method

An approach used in cash flow statement preparation that adjusts net income for changes in non-cash accounts to calculate cash from operating activities.

Net Cash Flow

The amount of cash generated or lost over a specific time period, accounting for cash inflows and outflows from operating, investing, and financing activities.

Common Stock

A type of equity security that represents ownership in a corporation, entitling holders to votes at shareholder meetings and to dividends when declared.