Which one of the following is a true statement regarding the components of the risk factor?
A)When choosing an investment,it is not necessary to consider the risk factor.
B)During inflationary times,there is no risk that the financial return on an investment will not keep pace with the rate of inflation.
C)The interest rate risk associated with corporate bonds is the result of changes in the interest rates in the economy.
D)The risk of business failure deals with changes in the value of stocks and bonds due to changes in interest rates in the market.
E)The prices of stocks,bonds,and other investments never fluctuate in the market.

Question

Quizplus · Accepted Answer

The interest rate risk associated with corporate bonds is indeed a result of changes in the interest rates in the economy. When interest rates rise, the prices of existing bonds typically fall, and vice versa. This is because new bonds would be issued at the new, higher rates, making the older, lower-yielding bonds less attractive.

Which One of the Following Is a True Statement Regarding