Question-1: What all are the returns received, when investor invest in fixed income security?

Answer: When investor invest money in the Fixed Income security following are the possible returns from that

• Market value when security is sold (If it is higher than buy price the obviously good for investor, selling at low price does not mean loss).
• The cash-flows received from the bond until it is held.

Question-2: What do you mean by risk in Fixed Income market?

Answer: There are several factors which can affect the return, when money invested in bond. And this factor is known as risk, if they affect the negatively on the return.

Question-3: What all are the possible risks, when money invested in fixed income?

Answer: Following are the risks associated with the Fixed Income security

• Inflation, or purchasing-power, risk
• Liquidity risk
• Exchange-rate, or currency, risk
• Volatility risk
• Interest-rate risk
• Reinvestment risk
• Call or prepayment risk
• Credit risk
• Political or legal risk
• Event risk
• Sector risk

Question-4: What is the interest rate risk?

Answer: As name suggest it is depending on the prevailing interest rates in the market. Adverse change in interest rates can affect the bonds return. This is also known as curve risk.

Question-5: What are the interest rate risk types?

Answer: Interest Rate Risk has following types of the risk:

• Level risk
• Yield-curve risk.