Define what is meant by interest rate risk. Assume you are the manager of a $100...
Define what is meant by interest rate risk. Assume you are the manager of a $100 million portfolio of corporate bonds and you believe interest rates will fall. What adjustments should you make to your portfolio based on your beliefs?
Homework Answers
Interest rate risks means the fluctuations or change in price
because of change in interest rate. Price can fluctuate and this
change in price can't be predicted due to change in interest
rate.
If interest rates fall then the price of corporate bonds will rise.
Hence, the value of portfolio will increase. In such case more
bonds need to be accumulated as price will rise and it can help in
gaining more profit.
Please Discuss in case of Doubt
Best of Luck. God Bless
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Define what is meant by interest rate risk. Assume you are the
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