Asked by Jackson Lukens on Jul 12, 2024
Verified
To exploit an expected decrease in interest rates, an investor would most likely
A) buy Treasury bond futures.
B) take a long position in wheat futures.
C) buy S&P 500 Index futures.
D) take a short position in Treasury bond futures.
E) None of the options are correct.
Treasury Bond Futures
Futures contracts based on the value of U.S. Treasury bonds, used by traders to speculate on or hedge against future changes in interest rates.
Interest Rates
The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
Wheat Futures
Financial contracts obligating the buyer to purchase wheat, and the seller to sell wheat, at a predetermined future date and price.
- Understand strategies for exploiting market expectations and price movements through futures.
Verified Answer
LO
Lindsey O'LearyJul 13, 2024
Final Answer :
A
Explanation :
When investors expect interest rates to decrease, bond prices typically increase. Buying Treasury bond futures allows investors to profit from the anticipated rise in bond prices due to falling interest rates.
Learning Objectives
- Understand strategies for exploiting market expectations and price movements through futures.