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longer maturity bonds have high price risk but low reinvestment risk, while higher coupon bonds have a higher level of reinvestment risk and a lower level of price risk. to account for the effects related to both a bond's maturity and coupon, many analysts focus on a measure called -select- , which is the weighted average of the time it takes to receive each of the bond's cash flows.

Respuesta :

When evaluating the risk of a bond Price risk is the chance that rising interest rates will lower a bond's value.

Compared to bonds that will mature soon, this risk is greater for bonds with extended maturities. Reinvestment risk is the possibility that falling interest rates would result in lower income from a portfolio of bonds.

On callable bonds, this risk is undoubtedly considerable. It is also high for short-term bonds since there are fewer years before the comparatively high old-coupon bonds are replaced with new low-coupon issues the shorter the bond's maturity.

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