The term 'interest rate risk' is associated withMultiple Choicevariable-return investments like common stocks and mutual funds.fluctuations in market price.floating rate bonds.fluctuations in inflation.fixed-return investments like government and corporate bonds

The term 'interest rate risk' is associated with fixed-return investments like government and corporate bonds.

Here's why:

Interest rate risk is the risk that arises for bond owners from fluctuating interest rates. How much interest rate risk a bond has depends on how sensitive its price is to interest rate changes in the market. The sensitivity depends on two things, the bond's time to maturity, and the coupon rate of the bond.

When interest rates rise, bond prices fall, and when interest rates fall, bond prices rise. The rationale is that as interest rates increase, the opportunity cost of holding a bond decreases since investors are able to realize greater yields by switching to other investments that reflect the higher interest rate.

For example, a 5% bond is worth less if interest rates rise to 7% since the bondholder receives only 5% interest. Therefore, fixed-return investments like government and corporate bonds are associated with interest rate risk.