Interest rate risk is the chance that changes in interest rates will adversely affect the value of an investment.

Question

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Interest rate risk refers to the potential for a change in interest rates to negatively impact the value of an investment. This risk is especially important to consider for fixed-income investments, such as bonds, where changes in interest rates can significantly impact the return on investment. For example, if interest rates rise, the value of existing bonds with lower interest rates will decrease, as investors can earn higher returns from newer bonds with higher interest rates. Similarly, if interest rates fall, the value of existing bonds with higher interest rates will increase, as they become more attractive to investors seeking higher returns. Therefore, interest rate risk is a real and significant concern for investors, and should be carefully considered when making investment decisions.

Interest Rate Risk Is the Chance That Changes in Interest