Albert just purchased a $1,000, 5.4%, 10-year bond when he heard about his friend Charlie who just bought a $1,000; 8%, 10-year bond. What kind of risk did Albert just experience?

Question

Quizplus · Accepted Answer

Albert just experienced interest rate risk, as his friend's bond has a higher interest rate, which means if market interest rates increase, the value of Albert's bond will decrease. Market risk refers to the overall risk in the stock or bond market, financial risk relates to a company's financial stability, and business risk pertains to a specific company's operations and performance.

Albert Just Purchased a $1,000, 5