SIE practice questionmediumInterest rate risk
A bond trader is concerned about volatility in the prices of long-term bonds. Which risk is most relevant to her concern?
- AReinvestment risk
- BInterest rate risk✓ Correct answer
- CCurrency risk
- DCall risk
Explanation
Why B — Interest rate risk
Long-term bonds are especially sensitive to interest rate movements, which is interest rate risk. The other risks do not directly cause bond price volatility.
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