Which of the following phrases indicates a potential requirement for future interest payments to be reinvested at a lower interest rate: Risk of reinvestment.
Reinvestment risk is the possibility that an investor won't be able to reinvest cash flows from an investment at a rate that is comparable to their current rate of return, such as interest or coupon payments. This new rate is known as the reinvestment rate.
Zero-coupon bonds (Z-bonds), which do not issue coupon payments during the course of their tenure, are the only fixed-income instrument without inherent investment risk. The likelihood that the cash flows from an investment would produce less in a new asset, leading to a loss of opportunity, is known as reinvestment risk. There is a possibility that
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