Mary Smith is considering investing in 30 year Corporate Bonds issued by Duke Energy Company.She knows that she will earn an interest rate of 8% by purchasing these bonds.However,she is concerned because she might need to take her money out of this investment in a year,and she has heard that she might have to sell the bonds at a significantly lower price than she will purchase them for.What type of risk is Mary concerned about?

Question

Quizplus · Accepted Answer

Mary is concerned about the risk of not being able to sell the bonds at a fair price if she needs to liquidate her investment quickly. This is known as liquidity risk. The other risks listed (inflation risk, interest rate risk, income risk, and personal risk) do not directly relate to Mary's concern about selling the bonds at a lower price than she purchased them for.

Mary Smith Is Considering Investing in 30 Year Corporate Bonds