Question 1 Assume you are an investor and you expect interest rate to rise in the near future, how would this affect your investment decision in the short and in the long term. Question 2 Assume yous are a potential borrower and you anticipate that interest rate will decline in the near future. How will it affect your borrowing decision in the short term as well as in the long term.

Question 1 Assume you are an investor and you expect interest rate to rise in the near future, how would this affect your investment decision in the short and in the long term. Question 2 Assume yous are a potential borrower and you anticipate that interest rate will decline in the near future. How will it affect your borrowing decision in the short term as well as in the long term.

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter4: Managing Your Cash And Savings

Section: Chapter Questions

Problem 9FPE

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Assume you’re an investor and you expect interest rate to rise in the near future, how would this affect your investment decision in the short and in the long term. Assume you’re a potential borrower and you anticipate that interest rate will decline in the near future. How will affect your borrowing decision in the short term as well as in the long term.
As an investor now or in the future, what are steps that you would take to mitigate the risk of interest rate risk? Do you believe age and current economic status play a role in how much interest rate risk investors can tolerate?
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Suppose investors expect interest rates to increase substantially in the future. Currently, should they prefer to purhcase short-term or long-term investments? Explain your asnwer.
What is expectations theory of the term structure of interest rates? Group of answer choices a. Long term interest is equal to average short-term interest rates. b. Average rates is the term of structure of interest rates. c. Short-term interest is equal to long-term interest rates. d. Long term interest is the sum of all short-term interest rates.
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How might a sudden decrease in people's expectations of future real estate prices affect interest rates? O A. Interest rates would increase because real estate would have a relatively lower rate of return compared to bonds, which would cause the demand for bonds to increase. B. Interest rates would increase because real estate would have a relatively higher rate of return compared to bonds, which would cause the demand for bonds to decrease. OC. Interest rates would decrease because real estate would have a relatively higher rate of return compared to bonds, which would cause the demand for bonds to decrease. O D. Interest rates would decrease because real estate would have a relatively lower rate of return compared to bonds, which would cause the demand for bonds to increase.
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2. What happens to domestic investment as the real interest rate rises? Explain your answer