The interest-rate risk of a bond is
A) the risk related to the possibility of bankruptcy of the bond's issuer.
B) the risk that arises from the uncertainty of the bond's return caused by changes in interest rates.
C) the unsystematic risk caused by factors unique in the bond.
D) a and b above.
E) a,b,and c above.

Question

Quizplus · Accepted Answer

Interest-rate risk refers to the risk that changes in interest rates will affect the bond's return. It is not related to the possibility of bankruptcy of the issuer (credit risk) or factors unique in the bond (unsystematic risk).

The Interest-Rate Risk of a Bond Is