Ch.10 · Risk Measures and Ratios · medium
What is 'reinvestment risk' in debt mutual funds?
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EXPLANATION
Reinvestment risk is the risk that coupon payments received from bonds will be reinvested at lower rates when interest rates decline. This affects the total return of the debt portfolio since the compounding effect is lower than expected. It is particularly relevant for long-term bonds that pay periodic coupons over many years.
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