Question

If an investor's holding period is longer than the term to maturity of a bond, he or she is exposed to___________ A) interest-rate risk. B) reinvestment risk. C) bond-market risk. D) yield-to-maturity risk.

Answer 1

Answer:              

option B

Explanation:

Reinvestment risk refers to the possibility that potential cash flow will have to be invested in low-yielding assets, like coupons (the annual interest charges on the bond) or the eventual returns of the investment.

Reinvestment risk refers to one of financial risk's primary styles. The term is used to describe the threat of anyone canceling or stopping a particular investment, which one might need to find another place to reinvest the cash with the risk of not getting an equally attractive prospect.

Thus, from the above we can conclude that correct option is B .