If you purchase a bond that matures in 5 years but you may have to cash it in before that time, you are exposed to

Question

Quizplus · Accepted Answer

Liquidity risk arises because you may need to sell the bond before maturity, potentially at a loss if the market is unfavorable. Interest rate risk is due to the possibility that interest rates may rise after you purchase the bond, decreasing its market value if you try to sell it before maturity.

If You Purchase a Bond That Matures in 5 Years