Q:
Which of the following would endure the most negative impact based on rising inflation:
a) 'AAA' Bonds
b) Blue Chip Stocks
c) Real Estate
d) Gold
A:
The correct answer is a).
Bonds show a far greater degree of vulnerability during inflationary times than do the other choices, which, historically, have fared well when the cost of goods and services has increased. Bondholders incur rising interest rates, which drive down the value of their investments. Furthermore, the interest paid on bonds also loses purchasing power during times of inflation.

RELATED FAQS

  1. What are the risks of investing in a bond?

    The most well-known risk in the bond market is interest rate risk - the risk that bond prices will fall as interest rates ...
  2. Do long-term bonds have a greater interest rate risk than short-term bonds?

    The answer to this question lies in the fixed income nature of bonds and debentures, often referred to together simply as ...
  3. How does a bull market in stocks affect the bond market?

    Take a deeper look at the relationship between the bond market and equities, and see what might happen to bonds during the ...
  4. What types of investors are susceptible to interest rate risk?

    Learn how bondholders are more susceptible to interest rate risk than equity investors because of the direct correlation ...
RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Bond Yield

    The amount of return an investor will realize on a bond. Several ...
  3. Bond Resolution

    1. A document used with government bonds, especially general ...
  4. American Callable Bond

    A bond that can be redeemed by the issuer at any time prior to ...
  5. Negative Bond Yield

    A negative bond yield is an unusual situation in which issuers ...
  6. U.S. Savings Bonds

    A U.S. government savings bond that offers a fixed rate of interest ...
Hot Definitions
  1. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. Price ...
  2. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  3. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  6. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
Trading Center