Which of the following types of risks affects owners of fixed income securities more than owners of equity securities?

Question

Quizplus · Accepted Answer

Interest rate risk affects owners of fixed income securities more than owners of equity securities because fixed income securities (e.g. bonds) have a fixed interest rate that becomes less attractive in a rising interest rate environment, which can result in a decrease in their market value. On the other hand, equity securities (e.g. stocks) are less affected by interest rate changes as their value is primarily determined by the performance of the underlying company. The other risks listed (business risk, event risk, market risk, purchasing power risk) can affect both fixed income and equity securities.

Which of the Following Types of Risks Affects Owners of Fixed