A U.S. investor owns a 15-year yen-denominated bond from the Central Bank of Japan. The investor will incur all but one of the following risks?
A) financial risk
B) interest rate risk
C) foreign exchange risk
D) purchasing power risk

Question

Quizplus · Accepted Answer

Financial risk primarily concerns the possibility of the Central Bank of Japan defaulting on its bond obligations, which is generally considered low for developed country central banks. Interest rate risk, foreign exchange risk, and purchasing power risk are all relevant to holding a yen-denominated bond.

A US Investor Owns a 15-Year Yen-Denominated Bond from the Central