If You Are Anticipating a Rising Interest Rate Environment, Your

question 68

Multiple Choice

If you are anticipating a rising interest rate environment, your planning and analysis of your loan and investment portfolio should focus on

• A) minimizing fixed rate investments and moving variable rate debt to fixed rate.
• B) investing in more fixed rate securities and moving variable rate debt to fixed rate.
• C) investing in preferred stock since the dividend rate is above the CD and bond interest rates.
• D) investing in CDs since they are insured by FDIC and minimizing borrowing.

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Definitions:

Endothermic

A reaction or process that absorbs energy from its surroundings, often in the form of heat.

Stability

The resistance of a chemical substance or compound to undergoing a change in its structure, properties, or composition over time or under certain conditions.

Kinetic Energy

The energy possessed by an object due to its motion, calculable as one-half the mass times the square of its velocity.

Electron Clouds

The region around an atomic nucleus where electrons are likely to be found, representing the electron’s probable location based on quantum mechanics.