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Options
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Interest Rate Risk
Correct answer
- B
Concentration Risk
- C
Default Risk
- D
Credit Risk
Why this is the answer
The risk discussed here is interest rate risk. Liquid funds have the shortest duration and are least affected by interest rate changes. As the duration increases (e.g., in medium-term bond funds), interest rate risk becomes more pronounced. Longer-duration bonds are more sensitive to interest rate fluctuations.
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