Inflation risk is the possibility that the purchasing power of interest income and repaid principal from a security or loan will be eroded by rising prices for goods and services.

Question

Quizplus · Accepted Answer

Inflation risk refers to the risk that the value or purchasing power of the interest income and repaid principal amount may decline due to inflation, which occurs when the general price level of goods and services rise over time. This means that the investor or lender may not be able to buy the same amount of goods and services with the money they receive in return.

Inflation Risk Is the Possibility That the Purchasing Power of Interest