Question

Nazim wants to include putable bonds in his investment portfolio. Nazim is likely to put the bonds when: a.He has reinvestment options with higher yields b.He has reinvestment options with lower yields Nazim also recently bought bonds with a clause stating that interest will be paid based on the inflation rate. When the inflation rate increases, the interest on the bonds will also increase. Nazim has invested in

Answer 1

1). Answer :- Option b). He has reinvestment options with higher yields.

2). Answer :- Nazim has invested in purchasing power bonds / Indexed bonds.

Answer 2

He has reinvestment options with higher yields

Income bonds

Step-by-step explanation:

Nazim is likely to put the bonds when he is in need of money and as such will go for a reinvestment option having a higher yield. Also, if Nazim recently bought bonds with a clause stating that interest will be paid based on the inflation rate, then Nazim has invested in income bonds, because income bond interest rate is dependent on inflation rate; as inflation rate increases, interest on the bond also increases.