Which of the following terms means that during periods when interest rates change substantially, bondholders experience distinct gains and losses in their bond investments?
A) credit quality risk
B) interest rate risk
C) liquidity rate risk
D) reinvestment rate risk

Question

Quizplus · Accepted Answer

Interest rate risk refers to the risk that the value of a bond will fluctuate due to changes in the general level of interest rates. When interest rates rise, bond prices typically fall, and vice versa. This is because the fixed interest payments of a bond become more or less attractive compared to the new bonds issued at the current higher or lower rates.

Which of the Following Terms Means That During Periods When