Reinvestment risk of bond's is usually higher on______?
Correct answer: B. Callable bonds
- A. Income bonds
- B. Callable bonds
- C. Premium bonds
- D. Default free bonds
Explanation
Callable bonds create greater reinvestment risk because the issuer may redeem them when interest rates fall, forcing investors to reinvest at lower rates. The call feature, rather than the bond being default-free, is the key reason.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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