Fixed income question from CFAI Mock question, interest, investor

kseniaru

A US investor who purchase an optionfree bond with a 7% coupon rate maturing in 20 years, and issued by a US based company is most likely exposed to:
A: volatility risk and credit risk
B: event risk and interest rate risk
C: volatility risk and yield curve risk
Correct answer is B. I answered A.
Why wouldn’t A be the better answer?
The question implies a nongovernmental bond with some measure of credit risk, meaning a possible downgrade (which narrows the likely answer down to A). A 20 year maturity implies greater volatility or interest rate rate risk (meaning A or B). Event risk relates to something beyond simply a downgrade in credit ratings.

bluejazzy

Remeber for bonds with embedded options have Volatility risk
The more volatile the interst rates, the more is the value of “bond Option” and this affects its price…

former

ok, thanks