Changes in interest rates represent the type of risk which can be categorized as

Question

Changes in interest rates represent the type of risk which can be categorized as:
A. Unsystematic risk B. Firm-specific risk C. Non-diversifiable risk D. Economics risk Changes in interest rates represent the type of risk which can be categorized as:
A. Unsystematic risk B. Firm-specific risk C. Non-diversifiable risk D. Economics risk Changes in interest rates represent the type of risk which can be categorized as:
A. Unsystematic risk B. Firm-specific risk C. Non-diversifiable risk D. Economics risk

Explanation / Answer

The interest rate risk is the risk that an investment's value will change due to a change in the absolute level of interest rates. Interest rate risk affects the value of bonds more directly than stocks, and it is a major risk to all bondholders. As interest rates rise, bond prices fall and vice versa. It can effect the economy as a whole. Hence it is most likely to be Economics risk.

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