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Investment term of the day: interest rate risk



The interest rate risk is the risk than an investment’s value will change due to a change in interest rates.

Interest rate risk affects the value of bonds more directly than stocks, and it is a major risk to all bondholders. How much risk is involved depends on how sensitive the bonds price is to interest rate changes in the market, which is in turn affected by the bond’s maturity time and coupon rate.

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