Under normal economic conditions, the major source of risk faced by investors who purchase investment grade bonds is
A) purchasing power risk.
B) interest rate risk.
C) liquidity risk.
D) default risk.

Question

Quizplus · Accepted Answer

Interest rate risk is the major source of risk for investors in investment grade bonds under normal economic conditions because the value of bonds moves inversely to changes in interest rates. When interest rates rise, the value of existing bonds typically falls, and vice versa.

Under Normal Economic Conditions, the Major Source of Risk Faced