95.3k views
20 votes
You deposit $1,500 in a bank where you have a savings account. The bank

pays you an interest of 5% per month. But later, the bank reduces the
interest rate from 5% to 3%, and that reduces your interest earnings from
$75 to $45.
What kind of risk explains the given situation?

User Mkaes
by
7.4k points

1 Answer

12 votes
Interest rate risk

Interest rate risk is the risk that arises for fixed-rate investments from fluctuating interest rates. How much interest rate risk a fixed-rate investment has depends on how sensitive its price is to interest rate changes in the market.
User SOK
by
8.3k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.