Final answer:
Bond investors are compensated for the risk of changing interest rates through the interest rate risk premium, which is a part of the bond's interest rate and reflects the potential higher returns required by investors to compensate for this risk. The correct option is '3) Interest rate risk premium'.
Step-by-step explanation:
Changes in interest rates affect bond prices, and this risk to bond investors is compensated by a component of the bond's interest rate known as the interest rate risk premium. The interest rate of a bond is composed of three parts: the compensation for delaying consumption, an adjustment for the inflationary rise in the level of prices, and the risk premium.
This risk premium addresses the riskiness of the borrower and includes compensation for various risks, including the risk of changes in the overall interest rate environment, which can negatively impact the value of bonds. The correct option that compensates bond investors for the risk of interest rate changes is '3) Interest rate risk premium' which reflects the higher potential return required by investors to compensate for the possibility of interest rate increases that would reduce the value of their bonds.