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 benefits of government bonds?

    <p>Its true for the fact that it is one of the safest instruments to invest, but do you really get the rate of return over ...
  2. 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 ...
  3. 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 ...
  4. What determines the price of a bond in the open market?

    Learn more about some of the factors that influence the valuation of bonds on the open market, and why bond prices and yields ...
  5. Why is my bond worth less than face value?

    Find out how bonds can be issued or traded for less than their listed face values, and learn what causes bond prices to fluctuate ...
  6. What causes a bond's price to rise?

    Learn about factors that influence the price of a bond, such as interest rate changes, credit rating, yield and overall market ...
RELATED TERMS
  1. Inflationary Risk

    The uncertainty over the future real value (after inflation) ...
  2. Bondholder

    The owner of a government or corporate bond. Being a bondholder ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer ...
  4. Bond Resolution

    1. A document used with government bonds, especially general ...
  5. Discount Bond

    A bond that is issued for less than its par (or face) value, ...
  6. U.S. Savings Bonds

    A U.S. government savings bond that offers a fixed rate of interest ...
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center