The sensitivity of future cash flows and the value of assets and liabilities to movements in interest rates is called:
A) financial risk.
B) business risk.
C) interest rate risk.
D) liability risk.

Question

Quizplus · Accepted Answer

Interest rate risk refers to the susceptibility of an asset's or liability's value to shift as a result of adjustments in interest rates. The degree of variation is determined by the security's duration, or time to maturity. This risk is relevant to all types of investors, including businesses and individuals, who must make investment and operational decisions with an awareness of current and anticipated interest rates.

The Sensitivity of Future Cash Flows and the Value of Assets