Question

Trend rate of growth in an economy affect on bond yields and equity market return.

A. Increases both
B. Decreases both
C. Increases bond yields, decreases equity market return
D. Decreases bond yields, increases equity market return

Answer 1

The trend rate of growth in an economy affects bond yields and equity market return. It C)increases bond yields and decreases equity market return.

Step-by-step explanation:

The trend rate of growth in an economy affects bond yields and equity market return. The correct answer is C. Increases bond yields, decreases equity market return.

When the economy is growing rapidly, interest rates tend to rise, which leads to an increase in bond yields. At the same time, investors may shift their investments from equity markets to bonds, causing a decrease in equity market returns.

On the other hand, when the economy is slowing down or in a recession, interest rates tend to decrease, which leads to a decrease in bond yields. Investors may then shift their investments back to equity markets, resulting in an increase in equity market returns.