Ask Question
BusinessBusiness
30 April, 14:49

Mr. Smith, your client, has maintained about 80% of his portfolio in fixed income securities. Interest rates are expected to decline over the next 12 month period. Mr. Smith calls you because he is concerned about this prediction and his portfolio. Which of the following recommendations would be appropriate for you to give to Mr. Smith?

[A] Move 50% of his portfolio into equity securities

[B] Leave his portfolio the way it is now

[C] Move 60% of his portfolio into Money Market funds

[D] Move 25% of his portfolio into Limited Partnerships

+1
Answers (1)
  1. 30 April, 15:45
    0
    (B) Leave his portfolio the way it is now

    Explanation:

    Bond value and market interest rates are inversely related. When the market interest rates are expected to decline and an investor already holds a bond with fixed rate of interest, the value of such bonds shall rise.

    Market interest rates refer to the rate of interest other firms are offering on similarly priced bonds. Thus market interest rate also implies investor expectations i. e YTM (yield to maturity) which is used as a discounting factor to ascertain the price of a bond.

    Lesser the discounting rate (yield to maturity), higher shall be the value of a bond.

    Thus, it is recommended for Mr Smith to (B) leave his portfolio the way it is now.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Mr. Smith, your client, has maintained about 80% of his portfolio in fixed income securities. Interest rates are expected to decline over ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
Bob owns a piece of land that the Green Stream flows through. An industrial polluter dirties the Green Stream and Bob attempts to sue the polluter and get an injunction to stop the practice.
Answers (1)
Which of the following will cause the multiplier to be smaller and cause changes in investor confidence to have a smaller effect in an economy? bigger leakages smaller leakages increased trade decreased trade
Answers (1)
Which of the following groups of employees is not covered by social security insurance? select one: a. self-employed persons b. clergy c. most military personnel d. railroad workers?
Answers (1)
Payment continues to represent a barrier to the widespread adoption of the sharing economy since many consumers feel uncomfortable exchanging cash or financial information with strangers. True or false?
Answers (1)
Ken and traci are two woodworkers who both make tables and chairs. in one month, ken can make 3 tables or 18 chairs, whereas traci can make 8 tables or 24 chairs. given this, we know that the opportunity cost of 1 table is
Answers (1)
New Questions in Business
The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320); imports ($35); exports ($22); personal consumption expenditures ($2,460); and, government purchases ($470).
Answers (1)
Which category of risk is often managed by purchasing insurance?
Answers (1)
Sun-hi, who operates a pan-asian restaurant in her apartment, is charged with criminal violations of the local health and building codes, state license regulations, and federal environmental statutes.
Answers (1)
A form of communication management that seeks to influence the feelings, opinions, or beliefs held by customers, prospective customers, stockholders, suppliers, employees, and other publics about a company and its products or services is referred to
Answers (1)
Usa jobs is an example of what
Answers (1)
Home » Business » Mr. Smith, your client, has maintained about 80% of his portfolio in fixed income securities. Interest rates are expected to decline over the next 12 month period. Mr. Smith calls you because he is concerned about this prediction and his portfolio.
Sign Up Forgot Password?