If You Purchase a Bond That Matures in 5 Years

question 62

Multiple Choice

If you purchase a bond that matures in 5 years but you may have to cash it in before that time,you are exposed to

• A) credit risk.
• B) default risk.
• C) interest rate risk.
• D) liquidity risk.

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Definitions:

Open Account

It generally refers to a commercial credit line that allows for the purchase of goods and services without immediate payment, payable at a later date.

Down Payment

An initial payment made when purchasing a good or service, typically a percentage of the total price, with the remainder due later.

Equipment

Tangible items used in the operation or production process of a business.

Financial Statement

A documented summary detailing a company's business operations and financial health, usually encompassing the balance sheet, income statement, and statement of cash flows.