Reinvestment Risk
Reinvestment risk is the risk that cash flows from a fixed-income investment, such as coupon payments or principal repayments, will be reinvested at a lower rate than the rate implied by the original investment, potentially reducing the total realized return.
Example: A portfolio with a bond that pays semiannual coupons may face reinvestment risk if market rates decline, causing reinvested cash flows to earn less than the bond's coupon rate.
💬 Comments