Economics Bonds Questions
The risk associated with investing in bonds is primarily the risk of default, where the issuer of the bond is unable to make interest payments or repay the principal amount. Other risks include interest rate risk, where changes in interest rates can affect the value of the bond, and inflation risk, where inflation erodes the purchasing power of the bond's fixed interest payments. Additionally, there may be liquidity risk, credit risk, and call risk depending on the specific characteristics of the bond.