Bond Investors Face Reinvestment Risk Because They Are Assumed to Reinvest

question 123

True/False

Bond investors face reinvestment risk because they are assumed to reinvest the coupons they are paid.

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Definitions:

Payor Bank

The bank responsible for disbursing the funds indicated on a check.

Drawer

In the context of banking and checks, the individual or entity that writes and signs a check, directing a bank to pay the stated amount.

Drawee

The entity, often a bank, on which a check or draft is drawn and is responsible for paying the amount specified.

Depositary Bank

A financial institution that holds and manages the securities of a depositor, facilitating the exchange of securities and related transactions.