Assume you expect an economic recovery. You expect interest rates to rise by the

Question

Assume you expect an economic recovery. You expect interest rates to rise by the same amount for bonds of all maturity. Which choices of bonds do you expect to perform the best? LOW QUALITY (also considered speculative/junk) CORPORATE BONDS OR US GOVERNMENT (treasury) BONDS. SHORT-TERM GOVERNMENT BONDS OR LONG-TERM GOVERNMENT BONDS

a) Low Quality Corporate Bonds, Short-Term Government Bonds

b) Low Quality Corporate Bonds, Long-Term Government Bonds

c) High Quality Corporate Bonds, Short-Term Government Bonds

d) High Quality Corporate Bonds, Long-Term Government Bonds

Explanation / Answer

b) Low Quality Corporate Bonds, Long-Term Government Bonds

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