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In: Finance

Which of the following terms means the chance that future interest payments will have to be...

Which of the following terms means the chance that future interest payments will have to be reinvested at a lower interest rate?

A. reinvestment rate risk

B. interest rate risk

C. credit quality risk

D. liquidity rate risk

Solutions

Expert Solution

Answer : A

Reinvestment rate risk

The principle and interest payments received by the investor from any financial instrument, may be invested again at the lower rate of interest than that of the original investment rate of interest. Such risk is called Reinvestment risk.

jeff jeffy answered 2 years ago
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