Treasury bonds are exposed to additional risks that are included________?
Correct answer: D. Both A and B
- A. Reinvestment risk
- B. Interest rate risk
- C. Investment risk
- D. Both A and B
Explanation
Treasury bonds are generally free from default risk, but they remain exposed to interest-rate risk and reinvestment risk. Interest-rate changes affect bond prices, while reinvestment risk affects the return earned on future coupon payments.
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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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