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Basic Question 14 of 18
Investors are exposed to ______ when they purchase bonds with sinking fund arrangements.
B. more credit risk but less reinvestment risk
C. less credit risk but more reinvestment risk
A. more credit risk and more reinvestment risk
B. more credit risk but less reinvestment risk
C. less credit risk but more reinvestment risk
User Contributed Comments 2
| User | Comment |
|---|---|
| Antoinepo | the reinvestment risk comes from the fact that when interest rate decrease the firms is more tempted to refinance (lower rate) and CALL the bonds faster then requiered which could cause lower than expected earnings for bond investors |
| s214111g | Antoinepo, thank you. |
Your review questions and global ranking system were so helpful.
Lina
Learning Outcome Statements
describe common cash flow structures of fixed-income instruments
CFA® 2024 Level I Curriculum, Volume 4, Module 2.