When a Bond Decreases in Value Because Interest Rates in the Economy

question 17

Multiple Choice

When a bond decreases in value because interest rates in the economy increase,it is an example of ________ risk.

• A)market
• B)interest rate
• C)inflation
• D)business failure
• E)current

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Definitions:

Initial Cost

The original cost of acquiring an asset, including purchase price and any expenses incurred to put the asset into use.

Cash Inflows

Money or equivalents received by a company during a specific period, which can come from operations, investments, or financing activities.

Payback Period

The duration it takes for an investment to return its initial cost to the investor, a measure of an investment's risk and liquidity.

Initial Cost

The total expense incurred to acquire an asset or start a project, including all relevant expenses.