As you allocate more of your investment portfolio to bonds, you reduce your exposure to ________ risk, but increase your exposure to ________.
A) interest rate; business risk
B) business; default risk
C) market; interest rate risk
D) default; liquidity risk

Question

Quizplus · Accepted Answer

Allocating more of your investment portfolio to bonds reduces exposure to market risk, as bonds are generally less volatile than stocks, but increases exposure to interest rate risk, as the value of bonds can decrease when interest rates rise.

As You Allocate More of Your Investment Portfolio to Bonds