Question

The strategy of riding upward sloping yield curve involves buying a bond with maturity lower than...

  1. The strategy of riding upward sloping yield curve

    involves buying a bond with maturity lower than the investment horizon

    involves buying a bond with maturity more distant than the investment horizon

    involves buying a bond with maturity that is the same for the investment horizon

    none of the answers are correct
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Answer #1

The strategy of riding upward sloping yield curve involves one in which a bond trader attempts to generate a total return by buying bonds of maturity longer than his investment horizon .

so option (A) involves buying a bond with maturity lower than the investment horizon is wrong as it is dealt with riding a declining yield curve.

Option (B) is correct as it can be related with riding a yield curve though it is not specific with riding an upward sloping yield curve.It can be assumed to be more distant on the upside so though it is not specific about the direction in which it is distant , I assume that the more distant specifies for longer maturity of bonds than investment horizon so Statement (B) IS TRUE.

Option (C) is also not correct as it advoctes buying a bond with maturity that is the same for the investment horizon.

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