An investor is worried that the value of her bond will decrease. Which risk and which...
An investor is worried that the value of her bond will decrease. Which risk and which event should she worry about?
Homework Answers
A rise in interest rate would cause the bond price to decrease. Interest rate risk is the investor is worried about and the event is the rise in interest rate. One of the reasons for the rise in interest rate could be that inflation is higher than expected.
Note that the bond price and interest rate are inversely related.
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