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Reinvestment Risk

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Risk Magazine
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Financial Dictionary

Reinvestment Risk

The risk that future proceeds will have to be reinvested at a lower potential interest rate.

Investopedia Commentary

This term is usually heard in the context of bonds. This "reinvestment risk" is especially evident during periods of falling interest rates where the coupon payments are reinvested at less than the yield to maturity at the time of purchase.

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Advanced Bond Concepts

See also: Country Risk, Liquidity Risk, Political Risk, Price Risk, Reinvestment, Risk Averse, Risk/Return Tradeoff, Systematic Risk, Unsystematic Risk

Investopedia.com. Copyright © 1999-2005 - All rights reserved. Owned and Operated by Investopedia Inc.
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Risk Magazine
Risk Magazine is dedicated to risk management & derivatives. Save 15%!
www.risk.net
Financial Dictionary

reinvestment risk

The possibility that the cash flows produced by an investment will have to be reinvested at a reduced rate of return. For example, the owner of a certificate of deposit faces the risk that lower interest rates will be in effect when the certificate matures and the funds are to be reinvested.

Wall Street Words: An A to Z Guide to Investment Terms by David L. Scott.
Copyright © 2003. Published by Houghton Mifflin.
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