The National Directory of Certified Public Accountants

Ask A CPA - Investments & Financial Planning

In Relation To The Stock Market , What Is Interest Rate Risk ?

Interest rate risk is an increase in prevailing interest rates will cause fixed income securities held by a Mutual fund to decline in value. Longer term bonds are generally more sensitive to interest rate changes than shorter term bonds. Generally, the longer the average maturity of the bonds held by a mutual fund, the more the fund's share price will fluctuate in response to interest rate changes.

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