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The risk that an investor will be forced to place earnings from a loan or security into a lower yielding investment is known as A.foreign exchange risk.B.credit risk.C.reinvestment risk.D.liquidity risk.E.off-balance-sheet risk.

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The risk that an investor will be forced to place earnings from a loan or security into a lower yielding investment is known as A.foreign exchange risk.B.credit risk.C.reinvestment risk.D.liquidity risk.E.off-balance-sheet risk.

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Solution

C. Reinvestment risk.

Reinvestment risk is the risk that an investor will be forced to reinvest the returns from an investment at a lower interest rate. This typically occurs when interest rates fall after the investor has made an investment with a fixed return, such as a bond or a certificate of deposit. When the investment matures or when interest payments are received, the investor may not be able to find a new investment that offers the same return.

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