In the Context of Interest Rate Risk,reinvestment Risk Occurs When

question 33

True/False

In the context of interest rate risk,reinvestment risk occurs when a fall in interest rates causes bond coupons to earn less than before.

---

Definitions:

Corrective Taxes

Taxes imposed to correct the market outcomes by accounting for externalities and bringing the social costs and benefits into balance.

Economic Efficiency

An economic state where every resource is optimally allocated to serve each individual or entity in the best way while minimizing waste and inefficiency.

Deadweight Losses

Losses in total surplus that occur when a market is not in competitive equilibrium, often due to taxes or subsidies.

Economic Efficiency

A situation where all resources are allocated in a way that maximizes the total benefit to society or minimizes waste.