The term maturity risk emphasizes the fact that:

Question

Quizplus · Accepted Answer

Maturity risk refers to the risk that the value of a bond will decline as interest rates rise. Longer-term bonds are more vulnerable to interest rate changes than shorter-term bonds, so the prices of longer term bonds change more than the prices of shorter term bonds when interest rates change. Therefore, option D is correct. Option A is incorrect because repayment risks are typically higher with higher credit risk, not necessarily longer maturity. Option B is incorrect because bond prices typically decrease as maturity lengthens, as longer-term bonds have greater interest rate risk. Option C is incorrect because it describes interest rate risk, not maturity risk.

The Term Maturity Risk Emphasizes the Fact That