IIA
IIA-CFSA · Question #504
If interest rates fall, a bond issuer may decide to pay off (or "retire") its debt and issue new bonds that pay a lower rate. When this happens, the fund may not be able to reinvest the proceeds in an
The correct answer is B. Prepayment risk in bond funds. See the full explanation below for the reasoning.
Question
If interest rates fall, a bond issuer may decide to pay off (or “retire“) its debt and issue new bonds that pay a lower rate. When this happens, the fund may not be able to reinvest the proceeds in an
Options
- ACredit risk in bond funds
- BPrepayment risk in bond funds
- CInterest rate risk in bond funds
- DAll of these
How the community answered
(63 responses)- A8% (5)
- B76% (48)
- C3% (2)
- D13% (8)
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