--%>
Assignment Help - homework help

Illustrate the Risks involved with bonds

Illustrate the Risks involved with bonds?

E

Expert

Verified

Risks involved with bonds include:

a. Capital risk, which means that the market price of a bond can change if market interest rates change and a holder needs to sell a bond before its maturity date.  Note that the market price of a bond varies inversely with market interest rates.

b. Risk of unexpected inflation means that the purchasing power of the bond will fall because its interest rate is less than the inflation rate.

   Related Questions in Business Economics

  • Q : Construct a 2-D graph which comprises

    How to construct a 2-D graph which comprises drawing a horizontal and a vertical axis?

    		•
  • Q : Loathed monopolization and viewed of

    Adam Smith and most of the typical economists who followed instantly in his footsteps: (i) viewed monopoly as no big problem. (ii) encouraged monopolies due to their research and development abilities. (iii) thought monopoly power was a communist plot

    		•
  • Q : Economics as a science Economics as a

    Economics as a science:We no longer ask the problem whether economics is an art or a science. Science is a systematized body of knowledge. Merely as physics and chemistry are sciences, econo

    		•
  • Q : What are the main sources of growth

    What are the main sources of growth?

    		•
  • Q : Which type of maximization required in

    Productive (technical) efficiency needs maximization of the: (i) opportunity cost of a specified value of output. (ii) resources used to produce a specified value of output. (iii) value of output produced for a given total cost. (iv) satisfaction atta

    		•
  • Q : Reasons for change in expanded

    What are the reasons for change in expanded production possibilities with women?

    		•
  • Q : What are the determinants of supply

    What are the determinants of supply?

    		•
  • Q : Theory of Purchasing Power Parity

    Question: The Theory of Purchasing Power Parity says that, in the long run, nominal exchange rates change to offset changes in relative i. _________________________ so that the purchasing power of two currencies st

    		•
  • Q : Illustrate the term Economic Rationale

    Illustrate the term Economic Rationale?

    		•
  • Q : Depreciation of the euro change the

    If the European euro declines in value (depreciates) in the foreign exchange market, would it be easier or harder for the French to sell their wine in the United States?  Suppose you were planning a trip to Paris.  How would the depreciation of the euro chan

    		•