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If an investor may have to sell a bond prior to maturity and interest rates have risen since the bond was purchased, the investor is exposed to the...

If an investor may have to sell a bond prior to maturity and interest rates have risen since the bond was purchased, the investor is exposed to

the coupon effect.
interest rate risk.
a perpetuity.
an indefinite maturity.

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interest rate risk. Explanation Interest rate risk is the risk that arises for bond owners from... View the full answer

2 comments
  • Remember the cardinal rule of bonds: When interest rates fall, bond prices rise, and when interest rates rise, bond prices fall. Interest rate risk is the risk that changes in interest rates (in the U.S. or other world markets) may reduce (or increase) the market value of a bond you hold. Interest rate risk—also referred to as market risk—increases the longer you hold a bond.
    • RuthKimeu
    • Jul 19, 2016 at 6:08pm
  • Please rate as best answer
    • RuthKimeu
    • Jul 19, 2016 at 6:08pm

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