Interest Rate Risk

Interest-rate risk describes the impact that a change in current interest rates is likely to have on the value of your investment portfolio.

You face interest-rate risk when you own long-term bonds or bond mutual funds because their market value will drop if interest rates increase.

That loss of value occurs because investors will be able to buy bonds with a new, higher interest rate, so they won't pay full price for an older bond paying a lower interest rate.

The exposure of an institution’s financial condition to adverse movements in interest rates.