Question
Which of the following statement concerning credit risk
is incorrect?Solution
Investors take on interest-rate risk when they purchase a bond with a certain rate of interest. There is a probability that once you purchase an investment, interest rates will rise or fall, making the value of that investment worth more or less than the price it was purchased for. Credit risk on the other hand, is when a borrower or a bond holder does not make a payment of his obligation in terms of principal and interest.
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