Bonds with long maturities expose the investor to high interest rate reinvestment risk, which is the risk that income will differ from what is expected because the cash flows received from bonds will have to be reinvested at different interest rates.

Question

Quizplus · Accepted Answer

Bonds with long maturities expose the investor to high interest rate risk, not reinvestment risk. Reinvestment risk is more significant for short-term bonds or callable bonds, where cash flows need to be reinvested at potentially lower rates.

Bonds with Long Maturities Expose the Investor to High Interest