Sources of risk to investors in municipal bonds include
1. fluctuations in interest rates
2. reinvestment rate risk
3. default risk

Question

Quizplus · Accepted Answer

All of the listed options are sources of risk to investors in municipal bonds. Fluctuations in interest rates can affect the bond prices inversely, reinvestment rate risk involves the risk of having to reinvest returns at a lower rate, and default risk is the risk that the bond issuer may fail to make timely payments of interest or principal.

Sources of Risk to Investors in Municipal Bonds Include