Ch 07: Assignment - Bonds and Their Valuation 8. Risks of investing in bonds The higher the risk of a security, the higher its expected return will be. A bond's risk level is reflected in its yield, but understanding the different risks involved when investing in bonds is important. The following graph shows the relationship between interest rates and maturity for three security classes US Treasury securities (USTS), AA-rated corporate bonds, and 360-rated corporate bonds. Use the selection dropdown lists to correctly associate each curve with its corresponding security YIELD II 0 5 10 15 20 25 30 YEARS TO MATURITY Frank Barlove is retiring soon, so he's concerned about his investments providing him with a steady income every year. He r e that interest the potential earnings power of the cash flow from his investments will increase. In particular, he is concerned that a decine in interest rates might lead to annual income from his investments. What kind of risk i Frank most concerned about protecting against Reinvestment risk Interest rate risk Answer the following question based on your understanding of interest rate risk and reinvestment risk. True or False Assuming a seis equal, short-term securities are exposed to higher res vestment risk than long-term securities 0 True False