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Which of the following arises because long-term bond prices change more with interest rate movements than...

Which of the following arises because long-term bond prices change more with interest rate movements than short-term bond prices?

a. liquidity risk

b. maturity risk

c. default risk

d. inflation risk

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Homework Answers

Answer #1

Option a, liquidity risk is the risk faced by the company in whose stock the investment is made and the difficulty in selling the security.

Option b, maturity risk occurs when in case of the price of a long term bond which has the risk of a price change due to change in Interest rate movements than short term bond.

Option c, default risk is the probability that a company or individual will not be able to fulfill its financial obligations.

Option d, inflation risk is the risk of increase in price of a good or service which results in less purchasing power.

Hence, the answer is option b.

In case of any query, kindly comment on the solution.

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