Question

Benny, who lives in carthage, mississippi, investe in a microsoft 10 year bond with a 2% coupon payment, paid semi-annually. benny is least likely subject to:

A. Interest rate risk.

B. Exchange rate risk.

C. Default risk.

D. Reinvestment rate risk.

Answer 1

Benny is least likely subject to Exchange rate risk. Therefore, the correct option is B.

Step-by-step explanation:

Benny, who lives in Carthage, Mississippi, invested in a Microsoft 10-year bond with a 2% coupon payment, paid semi-annually. Benny is least likely subject to Exchange rate risk. Exchange rate risk refers to the possibility of losses due to changes in the exchange rate of the currency in which the bond is denominated. Since Benny is investing in a Microsoft bond, which is denominated in US dollars and he lives in the US, there is no exchange rate risk involved.