SIE practice questionmediumInterest rate risk
A bond investor is concerned that rising rates will make their existing bonds less attractive, leading to price declines. This describes exposure to:
- AMarket risk
- BInterest rate risk✓ Correct answer
- CCall risk
- DCredit risk
Explanation
Why B — Interest rate risk
Interest rate risk is the risk of bond prices falling as rates rise. Market risk is general, while call and credit risk involve different issues.
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