Series 7 - General Securities Representative Exam

Preview Mode

A client believes that long term interest rates will decrease. The client could make a profit by using which TWO of the following strategies?

Buying T-bond Calls and Buying T-bond Puts
A
Buying T-bond Calls and Selling T-bond Puts
B
Buying T-bond Calls and Selling T-bond Calls
C
Buying T-bond Puts and Selling T-bond Puts
D

Explanations

Buying T-bond Calls and Selling T-bond Puts. Interest rates move inversely to bond prices. If rates decrease, the bond price will increase. So, the client could buy calls or sell puts to benefit from the move.

Pricing