Bonds whose term-to-maturity is longer than the holding period are subject to ________.
A) interest rate risk
B) exchange-rate risk
C) inflation
D) deflation

Question

Quizplus · Accepted Answer

Bonds whose term-to-maturity is longer than the holding period are subject to interest rate risk, where changes in interest rates can result in changes to the bond's value. This risk can be mitigated by holding a bond until maturity, but if the bond needs to be sold before maturity, there is a chance of losing money due to interest rate fluctuations. Exchange-rate risk, inflation, and deflation can also impact bond values, but they are not specifically related to the bond's term-to-maturity.

Bonds Whose Term-To-Maturity Is Longer Than the Holding Period Are