The interest rate risk is the prospective for investment losses that effect from an adjustment in interest rate. The rise in interest rate affect many investments but the fixed income investment and value of bonds will decline the most. Therefore bond and security holder watch interest rate more carefully and make decision on the basis of change in interest rate. The interest rate risk can be minimized by evading fixed income investments with interest rate swaps, options or other interest rate derivatives or by holding bonds of different durations.
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