Investors who limit themselves to risk free and low risk investments can avoid purchasing power risk.

Question

Quizplus · Accepted Answer

Purchasing power risk, also known as inflation risk, refers to the risk of the real value of an investment decreasing due to inflation. Even low-risk investments such as bonds and CDs can be subject to purchasing power risk if their returns are not keeping up with inflation. Therefore, investors who limit themselves to risk-free and low-risk investments may still face purchasing power risk.

Investors Who Limit Themselves to Risk Free and Low Risk