Nazim wants to include putable bonds in his investment portfolio. Nazim is likely to put the bonds when: a. He has reinvestment options with higher yields b. He has reinvestment options with lower yields Nazim also recently bought bonds with a clause stating that interest will be paid based on the inflation rate. When the inflation rate increases, the interest on the bonds will also increase. Nazim has invested in

He has reinvestment options with higher yields

Income bonds

Explanation:

Nazim is likely to put the bonds when he is in need of money and as such will go for a reinvestment option having a higher yield. Also, if Nazim recently bought bonds with a clause stating that interest will be paid based on the inflation rate, then Nazim has invested in income bonds, because income bond interest rate is dependent on inflation rate; as inflation rate increases, interest on the bond also increases.

1). Answer :- Option b). He has reinvestment options with higher yields.

2). Answer :- Nazim has invested in purchasing power bonds / Indexed bonds.