Risk that in a period of falling interest rates, the periodic coupon payments received during the life of a bond and/or the principal payment received from a bond that is called early must be reinvested at a lower interest rate than the bond’s original coupon rate.

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1. Risk that in a period of falling interest rates, the periodic coupon payments received during the life of a bond and/or the principal payment received from a bond that is called early must be reinvested at a lower interest rate than the bond’s original coupon rate.