Explain why bond investors are subject to interest rate risk

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Reference no: EM131317514

Bond investors are subject to two (2) principal types of risk: (1) interest rate risk and (2) default risk.

a. Explain why bond investors are subject to interest rate risk

b. Discuss the concept of default risk and how the “default risk premium” (for a corporate bond) is computed.

Reference no: EM131317514

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