The Interest-Rate Risk of a Bond Is

question 16

Multiple Choice

The interest-rate risk of a bond is

• A) the risk related to the possibility of bankruptcy of the bond's issuer.
• B) the risk that arises from the uncertainty of the bond's return caused by changes in interest rates.
• C) the unsystematic risk caused by factors unique in the bond.
• D) a and b above.
• E) a,b,and c above.

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Definitions:

Classical Economists

Economists from the 18th and 19th centuries who focused on free markets, supply and demand, and the idea of self-regulating economies.

Keynesians

Economists and followers of the economic theories of John Maynard Keynes, focusing on government intervention to mitigate the adverse effects of economic recessions.

Government Intervention

Involves actions taken by a government to affect the economy, typically through regulations, subsidies, tariffs, or monetary policies.

Depressions

Extended periods of economic downturn marked by severe declines in GDP, high unemployment, low consumer spending, and deflation, more intense and lasting longer than recessions.