Question

Rico Invested a lot of money in long-term bonds. Since he plans to wait for the bonds mature, his friends have warned him that there may be a
reinvestment risk Involved. Which statement most accurately describes the reinvestment risk that Rico faces?
A After maturity, the new bonds available may not offer the same rewards
B. Before maturity, the value of the bonds may decrease a lot.
C. By the time the bonds mature, the demand for investments may have fallen.
D. By the time the bonds mature, new bonds may become more valuable.

Answer 1

Answer:

A. After maturity, the new bonds available may not offer the same rewards

Step-by-step explanation:

When we want to invest money in bunds, we need to know a few things first.

Mainly, all bonds have risks and benefits, which are mutual exclusive, that is, if a bong is short term, it has lower risk, but it pays less money; if a bond is long term, it has high risk, but it pays more in theory.

The risk in long term bonds is the inflation, these bonds carry the risk of reduced value due to inflation in the future, that's the risk, it may pay less according to the economy in that future moment. However, short term bonds don't have that risk specifically, but they don't reward as much as long term bonds.

Therefore, the correct answer is A, because bond may not offer the same rewards in the future.

Answer 2

Answer:

THE ANSWER IS A.