Which one of the following statements is correct?

Question

Quizplus · Accepted Answer

Reinvestment risk refers to the uncertainty of future interest rates which affects the ability to reinvest coupon payments at the same rate as the original investment. This can cause realized yields to differ from promised yields. The other statements are incorrect because: A) Bond prices may fluctuate and investors may sell before maturity so the rate of return is not certain. C) Call provisions can cause realized yields to differ from promised yields. D) Redeeming a bond early may result in a lower yield than expected or even a loss. E) Realized yields can exceed promised yields if interest rates decrease and the bond is sold at a gain.

Which One of the Following Statements Is Correct