Joe Turner purchased a bond. As a result of an increase/decrease in market interest rates, the price of this bond falls/rises. This is an example of which type of risk?

Question

Quizplus · Accepted Answer

This is an example of interest rate risk, which is the risk that changes in market interest rates will impact the price of fixed-income securities such as bonds. When interest rates rise, bond prices fall because the fixed interest payments of the bond become less attractive compared to newly issued bonds with higher interest rates.

Joe Turner Purchased a Bond