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A bond investor faces reinvestment risk if his or her holding period is (a) shorter than...

A bond investor faces reinvestment risk if his or her holding period is
(a) shorter than the maturity of the bond.
(b) identical to the maturity of the bond.
(c) longer than the maturity of the bond.
(d) none of the above

justify answer

Solutions

Expert Solution

If the Maturity Period is shorter than Holding Period, the Maturity Value will be received early, and it will be required to be reinvested. But, if Maturity period is Equal to or Greater than Holding Period, that problem won't be there.

Therefore, (c) longer than the maturity of the bond

jeff jeffy answered 2 years ago
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