The risk of potential investment losses arising from changes in interest rates. This risk is particularly associated with fixed-income securities like bonds or other fixed-rate instruments. When interest rates rise, the value of existing fixed-rate investments may decline because newer investments offer higher yields. Conversely, when interest rates fall, the value of fixed-rate investments may increase as they offer higher yields compared to newer investments. Investors holding fixed-rate assets may experience fluctuations in their investment’s value due to changes in interest rates.
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