An investor in bonds who intends to sell them before they mature is exposed to price risk.

Question

Quizplus · Accepted Answer

Price risk refers to the risk that the market value of the bond will decline before the investor sells it. If the investor holds the bond until maturity, they will receive the face value of the bond regardless of any price fluctuations. However, if the investor sells the bond before maturity, they will receive the current market price, which may be higher or lower than the original purchase price. Therefore, investors who intend to sell their bonds before maturity are exposed to price risk.

An Investor in Bonds Who Intends to Sell Them Before