Posted in Finance, Accounting and Economics Terms, Total Reads: 955
Definition: Reinvestment Risk on bonds
It is assumed that the coupons received before maturity is being reinvested when the yield of the bond is being calculated. That additional income from reinvestment (interest-on-interest) depends on the prevailing interest-rate levels at the time of reinvestment. Volatility in this reinvestment rate because of changes in market interest rates is called reinvestment risk.