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.

Compute present and future values of lump sum amounts under various interest rates and time periods.

Determine the years required for an investment to reach a specified multiple under a given annual interest rate.

Calculate the interest rate earned on a bond based on its purchase price and future redemption value.

Evaluate investments using the concept of present value in scenarios involving different compounding frequencies.

---

Definitions:

Stockholder's Equity

What remains of a corporation's assets after liabilities are accounted for, denoting the interest of owners.

Long Term

Referring to assets, liabilities, or investments expected to last, or commitments expected to be active, for more than one year.

Treasury Bonds

Long-term government bonds issued by the U.S. Department of the Treasury, known for their safety and used by investors to diversify portfolios.

Interest Revenue

Income earned by a company from investments it has made in bonds, loans, or other interest-bearing assets.