Mary Sheets is considering investing in 30 year Corporate Bonds issued by Duke Energy Company. She knows that she will earn an interest rate of 8% by purchasing these bonds. However, she is concerned because she might need to take her money out of this investment in a year and she has heard that she might have to sell the bonds at a significantly lower price than she will purchase them for. What type of risk is Mary concerned about

Question

Clay Hamilton

Social Studies

19 January, 13:56

Mary Sheets is considering investing in 30 year Corporate Bonds issued by Duke Energy Company. She knows that she will earn an interest rate of 8% by purchasing these bonds. However, she is concerned because she might need to take her money out of this investment in a year and she has heard that she might have to sell the bonds at a significantly lower price than she will purchase them for. What type of risk is Mary concerned about

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Answers (1)

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Alexis Horton · Answer 1

Mary is concerned about Liquidity Risk

Explanation:

Liquidity risk is that the person or a company is unable to pay its short term debts out of its short term assets, as a result the finance is provided by taking loans or selling its fixed assets or investments. In this scenario, Mary have to sell its investment to finance its short term debts and needs this means that she is worried about the liquidity risk she is facing.