Difference between revisions of "Reinvestment 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)]], | ||
:[[Reinvestment rate risk]]. Occurs when a short-term debt security must be “rolled over.” If interest rates have fallen then the reinvestment of principal will be at a lower rate, with correspondingly lower interest payments and ending value. | :[[Reinvestment rate risk]]. Occurs when a short-term debt security must be “rolled over.” If interest rates have fallen then the reinvestment of principal will be at a lower rate, with correspondingly lower interest payments and ending value. | ||
| + | According to [[Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition)]], | ||
| + | :[[Reinvestment rate risk]]. The risk that a decline in interest rates will lead to lower income when bonds mature and funds are reinvested. | ||
==Related concepts== | ==Related concepts== | ||
Latest revision as of 22:45, 1 November 2019
Reinvestment rate risk is a risk that occurs when a short-term debt security must be “rolled over.” If interest rates have fallen then the reinvestment of principal will be at a lower rate, with correspondingly lower interest payments and ending value.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Reinvestment rate risk. Occurs when a short-term debt security must be “rolled over.” If interest rates have fallen then the reinvestment of principal will be at a lower rate, with correspondingly lower interest payments and ending value.
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Reinvestment rate risk. The risk that a decline in interest rates will lead to lower income when bonds mature and funds are reinvested.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
