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stranahan stranahan
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7 years ago
James is a rational investor wishing to maximize his return over a 20-year period. The current yield curve is inverted with one-year rates at 5.00% and 20-year rates at 3.50%. James will invest in the lower-rate 20-year bonds if:
A) he thinks rates will fall in the future and locking in long-term rates today may provide the highest long-run average return.
B) James has no idea what to do and should just skip this question.
C) he thinks rates will remain flat at 5% in the future and locking in long-term rates today will prevent him from appearing greedy to those without this investment opportunity.
D) he thinks rates will rise in the future and locking in long-term rates today may provide the lowest long-run average return.
Textbook 
Financial Management: Core Concepts

Financial Management: Core Concepts


Edition: 2nd
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ExpertXExpertX
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7 years ago
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stranahan Author
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#2
7 years ago
Thank you for  the help. I had a few questions on a few of them and this really confirmed my answers.
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