The risk that the returns on funds to be reinvested will fall below the cost of the funds is:
A)reinvestment risk
B)repricing gap
C)rate sensitivity
D)refinancing risk
E)none of the above

Question

Quizplus · Accepted Answer

Reinvestment risk refers to the risk that the returns on funds to be reinvested will fall below the cost of the funds. Repricing gap refers to changes in interest rates affecting the profitability of a bank, rate sensitivity is the degree of exposure to changes in interest rates, and refinancing risk refers to the risk that a borrower will not be able to refinance their debt when it comes due. Therefore, the answer is A.

The Risk That the Returns on Funds to Be Reinvested