If an investor's holding period is longer than the term to maturity of a bond,he or she is exposed to
A) interest-rate risk.
B) reinvestment risk.
C) bond-market risk.
D) yield-to-maturity risk.

Question

Quizplus · Accepted Answer

Reinvestment risk is the risk that the investor will have to reinvest the principal and interest at a lower rate than the original investment. If the holding period is longer than the bond's term to maturity, the investor will need to reinvest the proceeds from the bond when it matures, potentially at lower interest rates.

If an Investor's Holding Period Is Longer Than the Term