Frequently Asked Question

November 30 2009  |  Filed Under » , ,

The risk an investor is most likely to face when investing in a discounted U.S. Treasury bond is

a. Call risk b. Reinvestment risk

c. Credit risk

d. Purchasing power risk


Answer: B

because call risk would apply more often to a bond purchased at a premium rather than a discount, and a bond issued by the U.S. Treasury has the lowest credit risk. While purchasing power risk is a possibility, reinvestment risk is the risk the investor is most likely to face. Since the bond was bought at a discount, it would be difficult to get a similar return on reinvesting dividends if purchasing bonds at par.

Sign Up For Investing Basics!

Try Our Stock Simulator!

Test your trading skills!

by

Investopedia.com

Investopedia.com
No writer biography is available.
comments powered by Disqus
Last Questions Asked:
  1.

    Does the federal government fund any NGOs? Which ones?

  2. If I want to have some cash in a liquid account for unexpected emergencies, what is best? A savings account or another type?

  3. What is a triple tax-free municipal bond?

Recommended
Loading, please wait...
See More »
Trading Center