which risk is most associated with long term AAA rated bonds these are liquid ( marketable )
purchasing power risk
The most significant risk associated with long-term AAA rated bonds, which are liquid (marketable), is interest rate risk. Interest rate risk refers to the potential fluctuations in the bond’s value based on changes in interest rates. When interest rates increase, the value of the bond decreases, and when interest rates decrease, the value of the bond increases. Long-term AAA rated bonds have a longer maturity period, meaning they have a more extended period to be impacted by interest rate fluctuations. Additionally, the bond’s liquidity means that it can be readily bought and sold in the market; however, this also means that the bond’s value can be affected by supply and demand, leading to price volatility. It is crucial to understand the potential risks associated with long-term AAA rated bonds before making any investment decisions.
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