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Series 6 A

Fixed income Securities Risk

Credit Risk possibility that principal or interest will not be paid. Credit risk is usually measured against US Treasuries, which are considered to have none.
Interest Rate risk Possibility that increase in general level of interest rates will drive down prices of existing fixed-income investments. Long-term fixed income securities have more of this risk than those with shorter maturities.
Inflationary (Purchasing Power risk) Rise in general level of prices reduces the value of fixed payments. Some debt investors attempt to reduce this risk in their portfolios through equity investments or investments in gold.
Call Risk Bonds are more likely to be called when rated have dropped, forcing reinvestment of principal at low rates. Many bond issues are callable.
Prepayment risk Possibility that homeowners will repay mortgages more quickly than expected when interest rates fail. This risk is present in mortgage-backed securities and CMOs.
Created by: coderman