SIE Exam Question 308: Answer and Explanation

Question: 308

Investors whose bonds have been called as interest rates have fallen are now facing

• A. capital risk.
• B. reinvestment rate risk.
• C. inflation risk.
• D. credit risk.

Correct Answer: B

Explanation:

B - Investors would now be facing reinvestment rate risk, as bonds have been called and it will be difficult to find another investment offering the same return that was available prior to the bond being called.