Bonds whose term to maturity is shorter than the holding period are also subject to
A) default.
B) reinvestment risk.
C) both of the above.
D) none of the above.

Question

Quizplus · Accepted Answer

Bonds whose term to maturity is shorter than the holding period are subject to reinvestment risk. This occurs because the investor must reinvest the principal at a lower interest rate once the bond matures, leading to a lower overall return. There is no default risk involved in this scenario.

Bonds Whose Term to Maturity Is Shorter Than the Holding