Bond Risks Flashcards
1
Q
Bond prices are inversely related to interest rates (as interest rates increase, bond prices decrease and vice versa
A
Interest Rate Risk
2
Q
The credit quality rating of a bond owned may decline
A
Downgrade risk (or credit risk)
3
Q
Risk that the corporation will go bankrupt and not be able to pay back the ‘borrowed’ money
A
Default Risk
4
Q
The risk that inflation will undermine the performance of your investment
A
Inflation Risk (or purchasing power risk)
