Sources of risk to investors who purchase federal
Government bonds include
1) reinvestment rate risk
2) risk of inflation
3) interest rate risk

Question

Quizplus · Accepted Answer

Federal government bonds are subject to reinvestment rate risk, inflation risk, and interest rate risk. Reinvestment rate risk occurs when the proceeds from a bond are reinvested at a lower interest rate. Inflation risk is the risk that inflation will erode the purchasing power of the bond's future cash flows. Interest rate risk is the risk that rising interest rates will cause the bond's price to fall.

Sources of Risk to Investors Who Purchase Federal