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<p>New page: &lt;quiz display=simple shuffle=true case=(i)&gt; {The main sources of risk for interest rate securities include: |type=&quot;{}&quot;} { Interest } { rate } risk: Rising ________ _____ cause the price or...</p> <p><b>New page</b></p><div>&lt;quiz display=simple shuffle=true case=(i)&gt;<br /> {The main sources of risk for interest rate securities include:<br /> |type=&quot;{}&quot;}<br /> { Interest } { rate } risk: Rising ________ _____ cause the price or present value of a debt security to fall. This will generate a capital loss for the investor, and will reduce the amount of principal available to the borrower. This risk is also known as &#039;{ market } risk&#039;.<br /> { Credit } risk: This is the risk that the borrower will default either on the principal amount owed or the interest payments owed. (also known as { default } risk).<br /> { Reinvestment } risk: Fixed interest securities are valued on the assuption that all future cash flows are __-________ at the current market interest rate.<br /> { Marketability } or { liquidity } risk: This is the risk that the borrower&#039;s name is not readily traded in interest rate markets, therefore adding to the cost of buying and selling the debt security.<br /> { Inflation } risk. _________ reduces the purchasing power of cash flows that will be occurring in the future.<br /> { Political } risk. In some countries it is illegal for foreigners to own government debt.<br /> { Exchange } { rate } risk. This affects interest rate securities that are issued in a foreign country where the income and capital gain from the investment could be diminished due to adverse changes in the foreign exchange rates.<br /> &lt;/quiz&gt;<br /> <br /> [[Interest Rate Markets Quiz 7]]</div>

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