FINRA SIE quiz: Call risk

Call risk occurs most frequently in which of the following interest rate environments?

A. Flat
B. Volatile
C. High
D. Low

Answer: D. Low

Call risk is the risk that a bond is called when interest rates are low, forcing the investor to reinvest their money back into the market at a lower rate of return. Call risk is a form of reinvestment risk.

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