True or False QuestionTrue or false: Interest rate risk is the result of changes in the interest rates in the economy.True false question.TrueFalse

Answer

True.

Explanation

Interest rate risk refers to the potential for investment losses that can occur due to changes in interest rates. This risk is particularly relevant for bonds and other fixed-income securities. When interest rates rise, the market value of existing bonds typically falls, as investors can obtain higher yields on new bonds. Conversely, if interest rates fall, the value of existing bonds may increase. This dynamic is a fundamental principle in financial markets, where the prices of securities are heavily influenced by prevailing interest rates. Therefore, the statement that interest rate risk is the result of changes in the interest rates in the economy is true.