Question

Select one of the choices below that best completes the following sentence: If an investor sold long-term bonds and used the proceeds to purchase short-term bonds, this would increase the investor's exposure to ________ risk and decrease the investor's exposure to ________ risk.

Answer 1

Answer:

Reinvestment; Price

Explanation:

Reinvestment risk refers to the possibility that an investor will be unable to reinvest cash flows at a rate comparable to their current rate of return.

Price risk is the potential for the decline in the price of an asset or security relative to the rest of the market. It excludes market risk, or the potential for an entire market to go down in value.