题干

问题如下：

Which of the following adverse consequences is mostlikely associated with extension risk?

选项：

A.

Investors must reinvest the proceeds at lower interestrates

B.

Higher interest rates reduce the value of the cashflows investors receive

C.

The prepayment option reduces the potential priceappreciation for the bond

解释：

Correct Answer: B

Extension risk is the risk that the borrower might payback the money borrowed more slowly than anticipated, extending the time ofrepayment and the maturity of the bond. For investors, this has one adverse consequence:Higher interest rates reduce the value of the cash flows investors receive. Thepayments the investors receive will be discounted at a higher interest rate,and the extension stretches out the payments the investors receive