Question

If you are a retiree, which of the following risks associated with the bonds are you most concerned about?

	a.	Price Risk
	b.	Interest Rate Risk
	c.	Default Risk
	d.	Reinvestment Risk

Answer 1

Answer is b ie interest rate risk and reason for choosing this is mentioned below

After retirement.. Investor wants his continuous income and will focus on only his interest income. Hence the other factor will have no point to the retiree. If the interest rate goes higher then income will increase and vice versa because income and interest are directly proportionate to each other as the interest so received is always calculated on the face value of the bond and not on the market value.

Therefore the retiree will be concerned only about the interest rate.