SIE practice questionmediumReinvestment risk
A retiree invests in a ladder of bonds with staggered maturities, but is concerned about reinvesting proceeds at lower yields in a declining rate environment. Which risk does this illustrate?
- ACall risk
- BMarket risk
- CReinvestment risk✓ Correct answer
- DCurrency risk
Explanation
Why C — Reinvestment risk
Reinvestment risk is the chance that future proceeds will be invested at less favorable rates. Call and market risks are unrelated; currency risk only applies to foreign assets.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Risk & Portfolio Management questions
- An investor trying to sell municipal bonds finds few buyers and must accept a much lower price. This is an example of:
- An investor’s portfolio value drops sharply during a broad market downturn, even though the individual securities are…
- Which investor faces currency risk?
- A highly leveraged company is more exposed to which kind of risk?