If an Investor's Holding Period Is Longer Than the Term

question 79

Multiple Choice

If an investor's holding period is longer than the term to maturity of a bond,he or she is exposed to

• A) interest-rate risk.
• B) reinvestment risk.
• C) bond-market risk.
• D) yield-to-maturity risk.

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Definitions:

Macroeconomic Equilibrium

A state in which aggregate supply equals aggregate demand, leading to an equilibrium level of prices and output in the economy.

Average Price Level

An index that summarizes the overall movement in prices for goods and services in an economy over a period of time.

Interest Rates

The percentage of a loan amount charged by the lender to the borrower for the use of money, expressed as an annual percentage.

Consumption

The use of goods and services by households or individuals for personal needs or enjoyment, as opposed to investment or production purposes.