Question

Assume that the Fed will lower the interest rate in the near future. A speculative investor is likely to ____ U.S. T-Bill (bond) now then ____ them in the near future.

		sell; buy
		buy; sell

Answer 1

As it has been assumed that Fed will lower the interest rate in the near future. So a speculative is likely to buy U.S. T-Bill (bond) because it is not profitable to hold bond now at higher interest rate. But when in near future the interest rate will be lower, then it is better to sell the U.S. T-Bill (bond).

Hence it can be said that when the Fed will lower the interest rate in the near future. A speculative investor is likely to buy U.S. T-Bill (bond) now then sell them in the near future.

Hence option second is the correct answer.