All of the following are true regarding the interest rate risk EXCEPT
A) rising interest rates cause bond prices to rise as well.
B) all investors are subject to this risk.
C) changes in interest rate can affect both an investor's income stream and the value of the investor's assets.
D) rising interest rates cause bond prices to fall.
E) when interest rates rise, it is more expensive to borrow money.

Question

Quizplus · Accepted Answer

All investors are subject to the interest rate risk caused by changing interest rates. Interest rate changes can affect both an investor's income stream and the value of the assets held by that investor. Rising interest rates cause bond prices to fall, and the prices of other assets will also fall if they are purchased with borrowed money. When interest rates rise, it is also more expensive for companies to borrow money, and that can lower their returns.

All of the Following Are True Regarding the Interest Rate