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Risk of a bond


All bonds carry some degree of "credit risk," or the risk that the bond issuer may default on one or more payments before the bond reaches maturity. In the event of a default, you may lose some or all of the income you were entitled to, and even some or all of principal amount invested.

Is a bond a high risk?

Bonds in general are considered less risky than stocks for several reasons: Bonds carry the promise of their issuer to return the face value of the security to the holder at maturity; stocks have no such promise from their issuer.

How do you calculate the risk of a bond?

It is calculated as modified duration * bond market price (incl. any accrued interest) * 1/10000.

Is a bond high or low risk?

While bonds are considered safer investments, they're not risk-free. The biggest risk to bond investors is that the issuer won't make timely payments, known as credit risk. The lower a bond's credit rating, the higher its credit risk. A bond's default risk can change over its lifetime.

What is the greatest risk of bonds?

Just as inflation erodes the buying power of money, it can erode the value of a bond's returns. Inflation risk has the greatest effect on fixed bonds, which have a set interest rate from inception.




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