Interest Rate Risk: Definition, Formula & Models

Instructions:

Choose an answer and hit 'next'. You will receive your score and answers at the end.

question 1 of 3

Interest rate risk can affect:

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1. The concern in reinvestment rate risk is:

2. Two types of bonds that were designed to eliminate reinvestment rate risk are:

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About This Quiz & Worksheet

Interest rate risk is unique in that it is the only one of the five types of risk that is not specific to a firm, and this quiz and worksheet combination will help you test your understanding of this concept. The questions on the quiz will test you on the characteristics of interest rate risk and strategies for mitigating this risk.

Quiz & Worksheet Goals

In these assessments, you'll be tested on:

  • What interest rate risk can affect
  • The effects of a Federal Reserve Treasury bond buy-up
  • Bond types meant to eliminate reinvestment rate risk
  • Strategies for mitigating interest rate risk
  • The purpose of financial futures contracts

Skills Practiced

  • Reading comprehension - ensure that you draw and retain the pertinent information on interest rate risk from the related lesson
  • Interpreting information - verify that you can read information regarding risk and interpret it correctly
  • Information recall - access the knowledge you've gained regarding interest rate risk, reinvestment risk, the U.S. Treasury, and the risk management strategies discussed in the lesson

Additional Learning

Check out the lesson titled Interest Rate Risk: Definition, Formula & Models to gather more information on this topic. This lesson covers the following objectives:

  • Define interest rate risk and reinvestment rate risk
  • Look in detail at risk mitigation strategies
  • Understand the effects of interest rates
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