CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

Investors are exposed to ______ when they purchase bonds with sinking fund arrangements.

A. more credit risk and more reinvestment risk
B. more credit risk but less reinvestment risk
C. less credit risk but more reinvestment risk
Correct Answer: C

User Contributed Comments 1

User Comment
Antoinepo the reinvestment risk comes from the fact that when interest rate decrease the firms is more tempted to refinance (lower rate) and CALL the bonds faster then requiered which could cause lower than expected earnings for bond investors
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