Reinvestment Risk

Reinvestment Risk

Fixed-income investors constantly face reinvestment risk. Reinvestment risk is the risk investors face when they receive cash from, say a bond that has redeemed or when a company exercises a call option on a bond and investors receive their money back earlier than expected. The risk lies in the investor’s potential inability to find an investment that pays similar yields to the one that has matured or has been called.

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