CFA Practice Question

There are 136 practice questions for this study session.

CFA Practice Question

Which one is a more useful consumption hedge for investors?

A. A long-term government bond
B. A short-term government bond
C. Neither type of bond can serve as a useful consumption hedge for investors.
Correct Answer: B

Government bonds tend to pay off in bad times. Longer-dated government bonds tend to be less negatively correlated with consumption and therefore represent a less useful consumption hedge for investors.

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