When a bond decreases in value because interest rates in the economy increase,it is an example of ________ risk.
A)market
B)interest rate
C)inflation
D)business failure
E)current

Question

Quizplus · Accepted Answer

Interest rate risk is the risk that the value of a bond will decrease due to an increase in interest rates. This happens because as new bonds are issued with higher interest rates, the older bonds with lower rates become less attractive, causing their market value to drop.

When a Bond Decreases in Value Because Interest Rates in the Economy