When considering the risk from investing in a 25-year government of Canada bond yielding 4 percent,the most significant risk is interest rate risk.

Question

Quizplus · Accepted Answer

The most significant risk when investing in a bond with a longer maturity, such as a 25-year government of Canada bond, is interest rate risk. This is because as interest rates rise, the market value of existing bonds decreases, and vice versa. Therefore, if an investor holds a bond with a fixed interest rate and interest rates rise, the investor may experience a decrease in the market value of the bond.

When Considering the Risk from Investing in a 25-Year Government