You decide to invest $10,000 in bonds
with a 10% interest rate for 5 years,
earning an interest of $1,000 after 5 years.
But with prices rising at 3% each year on
average, the value of $1,000 will only be
$970 next year, then another
3% less the year after that, and so on-
thus significantly lower when the term
ends. This is an example of:
O Inflation Risk
O Disinflation Risk
O Business Deflation
O Opportunity cost
O Liquidity risk