Question

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Solid Rock Fund invests in long-term high quality corporate fixed-income securities. Investors would most likely be...

Solid Rock Fund invests in long-term high quality corporate fixed-income securities. Investors would most likely be attracted to this fund during times of:
A. High equity returns.
B. High inflationary periods.
C. Falling interest rates.
D. Concentrated sector bankruptcies.

Solutions

Expert Solution

Option B is correct. High inflation periods means that the nominal rate will be high which means that the yields of the fixed income securities will be high hence that will be the time when investors will be attracted to them the most. Other scenarios mentioned are not favorable to fixed income investments.


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