Question

Sonia is considering selling her stocks to buy bonds. Under what circumstances would this most likely be a wise move?


Select the best answer from the choices provided.
when her risk tolerance is low
when her risk tolerance is high
when commodity prices are low
when commodity prices are high

Answer 1

@sylbot

Answer 2

I would say it when commodity prices are high, because you can make a larger profit (since stocks are equity in commodities), and bonds would be cheaper. But its kinda hard to speculate this way, but generally that is the most profitable way.

Answer 3

@sylbot im not sure but i thought commodity prices are low

Answer 4

however I'm not sure if they are just talking about what she would prefer to do. if thats the case then I'd go with A

Answer 5

its either C OR D

Answer 6

But if you sell stock you already own when commodities are low, you will LOSE a lot of money (since if they are low, you'd want to buy stock because you're getting a great deal)

Answer 7

say commodity prices are low, then you would want to BUY stock because you are getting a GOOD DEAL, its like a sale in a store.

Answer 8

this is a tricky question

Answer 9

like think about basic profitability with stocks: Buy low, sell high.

Answer 10

yes yes

Answer 11

when commodity prices are low
when commodity prices are high

Answer 12

its either these two

Answer 13

so if a you are holding stock, and the price is high, you'd want to sell and invest in bonds because the price should go down to normal levels but then you'd have bonds (which are an absolute value of money) so your bonds can by MORE stuff

Answer 14

Stocks aren't stable and bonds are

Answer 15

I would go with D

Answer 16

The risk of owning a stock compared to a bond is that the value of a company can go down.

Answer 17

check this out

Answer 18

if you liquidate equity when the price is low, you are basically selling low, and buying high, so you'd pretty much lose money.

Answer 19

she would sell her bonds because the company she is investing is going down

Answer 20

no a bond is a debt in terms of dollar value, if the company is declining in value, you want bonds.

Answer 21

Oh ok I think I understand what is happening, you are thinking about her present value, I am thinking about the future value.

Answer 22

im talking about her present

Answer 23

Under what circumstances would this most likely be a wise move?

Answer 24

IS asking for a good reason why would she do that

Answer 25

stocks increase during inflation

Answer 26

so if a commodity price is high, stock value is high, yes so her present value is high, BUT that is not the time to BUY more stock, because you pay a lot more for the same equity. if the price is high, then it should decline in the future to normal values so if you hold stocks you would LOSE value over time. This is not so with bonds. You can sell the stock at a high price and then your dollar value is worth MORE when commodities price stablize

Answer 27

you never want to sell a stock when the price is low.

Answer 28

remember, buy low sell high. So if price of commodities is high, then you need to sell.

Answer 29

a stock is equity in producing commodity.

Answer 30

@sylbot you are right the correct answer is D

Answer 31

yeah the trick is just remember, "Buy low, sell high"

Answer 32

yes thats what the whole concept is about

Answer 33

yeah so commodity high= stock high= sell