The price effect and reinvestment effect are both sources of interest rate risk.

Name: The price effect and reinvestment effect are both sources of interest rate risk.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The price effect refers to the impact of changes in interest rates on the value of a security, while the reinvestment effect relates to the potential for future cash flows to be reinvested at lower rates. Both of these effects can result in interest rate risk for investors.

The Price Effect and Reinvestment Effect Are Both Sources of Interest