You Expect Interest Rates to Decline in the near Future

question 115

Multiple Choice

You expect interest rates to decline in the near future even though the bond market is not indicating any sign of this change.Which one of the following bonds should you purchase now to maximize your gains if the rate decline does occur?

• A)short-term; low coupon
• B)short-term; high coupon
• C)long-term; zero coupon
• D)long-term; low coupon
• E)long-term; high coupon