Difference between revisions of "Interest rate risk"
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According to [[Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition)]], | According to [[Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition)]], | ||
:[[Interest rate risk]]. Arises from the fact that bond prices decline when interest rates rise. Under these circumstances, selling a bond prior to maturity will result in a capital loss; the longer the term to maturity, the larger the loss. | :[[Interest rate risk]]. Arises from the fact that bond prices decline when interest rates rise. Under these circumstances, selling a bond prior to maturity will result in a capital loss; the longer the term to maturity, the larger the loss. | ||
| + | According to [[Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition)]], | ||
| + | :[[Interest rate risk]]. The risk of [[capital loss]]es to which investors are exposed because of changing [[interest rate]]s. | ||
==Related concepts== | ==Related concepts== | ||
Latest revision as of 22:45, 1 November 2019
Interest rate risk is a risk that arises from the fact that bond prices decline when interest rates rise. Under these circumstances, selling a bond prior to maturity will result in a capital loss; the longer the term to maturity, the larger the loss.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Interest rate risk. Arises from the fact that bond prices decline when interest rates rise. Under these circumstances, selling a bond prior to maturity will result in a capital loss; the longer the term to maturity, the larger the loss.
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Interest rate risk. The risk of capital losses to which investors are exposed because of changing interest rates.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
