n NISM Certifications
NSM General NISM
Medium

What is reinvestment risk in the context of fixed income securities held by debt funds?

Practice question from Risk, Return & Performance of Funds Test — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    The risk of the issuer defaulting on interest payments

  2. The risk that interest rates prevailing on coupon payment or maturity dates may differ from the original coupon of the bond

    Correct answer

  3. C

    The risk of a downgrade in the credit rating of the security

  4. D

    The risk of the security becoming illiquid

A full explanation for this question is being written. In the meantime, the correct answer is highlighted above.

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