Which of the below statements is TRUE?

Question

Quizplus · Accepted Answer

The statement that is true is D, which defines price risk as the risk that the price of the bond will be lower than expected at the end of the investment horizon. A is incorrect because the pure expectations theory does not consider risks, but rather assumes that investors have unbiased expectations about future interest rates. B is incorrect because the risk associated with uncertainty about the price of the bond at the beginning of the investment horizon is called reinvestment risk. C is incorrect because it is possible for an investor to consider investing in a longer-term bond and selling it before maturity, but this would expose the investor to interest rate risk and potentially higher transaction costs.

Which of the Below Statements Is TRUE