The risk of changes in the price or value of fixed-rate debt instruments resulting from changes in market interest rates.
A) Maturity risk premium
B) Default risk premium
C) Interest rate risk
D) Inflation premium

Question

Quizplus · Accepted Answer

Interest rate risk refers to the risk of changes in the price or value of fixed-rate debt instruments resulting from changes in market interest rates. This risk arises due to the sensitivity of fixed-rate debt instruments to changes in interest rates. As interest rates increase, the value of these instruments decreases, and as interest rates decrease, the value of these instruments increases. Consequently, investors must consider interest rate risk while investing in fixed-rate debt instruments.

The Risk of Changes in the Price or Value of Fixed-Rate