Which of the Following Is the Greatest Risk in Holding

question 47

Multiple Choice

Which of the following is the greatest risk in holding a Provincial bond with face value $10000 which matures in five years,has a semi-annual 7% coupon,which you purchased for $12050 ?

• A)The inflation risk because the real return may not beat inflation of two percent
• B)Reinvestment risk that the coupons may not be able to be reinvested at the same return
• C)Default risk if interest rates rise by two percent
• D)Interest rate risk because interest rates may increase by one percent

---

Definitions:

Income Taxes

Taxes levied by the government on income generated by businesses and individuals within their jurisdiction.

Accounting Period

A specific period of time used for financial reporting, typically a year or quarter, during which a company's financial performance is calculated.

Adjusting Entries

Accounting records created at the conclusion of an accounting cycle to distribute revenues and expenses to the period they truly belong.

Cash Flow Statement

A cash flow statement is a financial report that provides aggregate data regarding all cash inflows and outflows a company receives.