SIE practice questioneasyInterest rate risk
A client holds a long-term bond. If interest rates rise, the price of the bond is likely to:
- AIncrease
- BStay the same
- CDecrease✓ Correct answer
- DFluctuate unpredictably
Explanation
Why C — Decrease
When interest rates rise, bond prices generally fall, exposing investors to interest rate risk. The other choices do not reflect this inverse relationship.
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