What is the appropriate action when stock index prices rise?

Get ready for FIN4243 Debt and Money Markets Exam at UCF. Use flashcards and multiple choice tests, with detailed explanations for each answer. Ace your exam!

When stock index prices rise, the appropriate action is to go long on stock index futures. This strategy leverages the upward movement in the market. By going long, an investor is essentially betting that the prices of the index will continue to increase, allowing them to benefit from potential gains as the value of the index rises.

Going long on stock index futures means taking a position that profits when the index appreciates. This is a common strategy among investors looking to capitalize on bullish market conditions, as it aligns with their expectations of future market performance.

Taking other actions, such as shorting stock index futures or selling short individual stocks, would generally be more suitable during bearish market phases. Investing in bonds may provide stability but typically does not capitalize on the rising equity market in the same way that going long on index futures does.

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