Price Risk Is the Risk That

question 64

Multiple Choice

Price risk is the risk that:

• A)coupon payments will be reinvested at a rate that is less than the bond's yield to maturity.
• B)the bond principal will not be paid in full or on time.
• C)the bonds in a dedicated portfolio will decrease in value in response to an increase in interest rates.
• D)market prices increase due to market interest rate changes making bonds more expensive to purchase.
• E)the yield to maturity will be less than the inflation risk causing the real rate of return to be negative.

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Definitions:

Translation Statement

A financial document that converts the monetary values in financial statements from one currency to another.

Issued Capital

The total value of a company’s shares that have been sold to shareholders and are currently outstanding.

Translation Gain

Translation gain arises when the exchange rate changes favorably while converting foreign currency transactions or financial statements into the reporting currency.