Question: You expect interest rates decline by 1% every year for the next three years. Based on this information, which investment strategy should you choose? Investment

You expect interest rates decline by 1% every year for the next three years. Based on this information, which investment strategy should you choose?

Investment Strategy

A: Buy a 10-year treasury note today and hold it for the next 10 years.

Investment Strategy

B: Buy a 1-year treasury bill today, and reinvest it one year from now in another 1-year treasury bill. Every year, continue this practice for a total of 10 years.

You would be indifferent between these two investment strategies.

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