The risks that cause uncertainty about the return over some investment horizon are:
A) The uncertainty about the price of a bond at the end of the investment horizon.
B) The uncertainty about the rate at which the proceeds from a bond that matures prior to the maturity date can be reinvested until the maturity date.
C) The uncertainty about the movement of equity prices relative to debt instruments.
D) a and b only.
E) All of the above.

Question

Quizplus · Accepted Answer

The correct choices are A) The uncertainty about the price of a bond at the end of the investment horizon and B) The uncertainty about the rate at which the proceeds from a bond that matures prior to the maturity date can be reinvested until the maturity date. These are examples of interest rate risk and reinvestment risk, respectively, which are key risks affecting the return on investments, particularly in fixed-income securities like bonds. Choice C) is not directly related to the uncertainty about the return over some investment horizon in the context of the other options, as it compares different asset classes rather than focusing on the risks to returns within a given investment.

The Risks That Cause Uncertainty About the Return Over Some