SIE Exam Question 649: Answer and Explanation

Question: 649

Which of the following refers to the inverse relationship between bond prices and an investor's required rate of return?

• A. Credit risk
• B. Interest rate risk
• C. Liquidity risk
• D. Reinvestment risk

Correct Answer: B

Explanation:

Interest rate risk is the risk that, as interest rates rise, bond prices will fall. Interest rate risk is measured by a bond's duration.