Question #73
Reading: Reading 25 The Term Structure and Interest Rate Dynamics
PDF File: Reading 25 The Term Structure and Interest Rate Dynamics.pdf
Page: 29
Status: Unattempted
Correct Answer: A
Question
Which one of the following actions is most consistent with the strategy of riding an upward sloping the yield curve? Buying bonds with a maturity:
Answer Choices:
A. shorter than the investor’s horizon
B. equal to the investor’s horizon
C. longer than the investor’s horizon
Explanation
If the yield curve is upward sloping and is expected to remain the same, higher returns can
be obtained by riding the yield curve, i.e., buying bonds with a longer maturity than the
investor's horizon.