Interest rate risk refers to the interest rate in a particular country increasing. This is a problem for companies as it becomes more expensive for them to borrow money.
If borrowing money becomes more expensive, it can have a significant impact on the profitability of a company. It can also limit the number of new business opportunities that a company can take.
If interest rates risk in a country, it tends to have a negative impact upon stocks. When interest rates go down, this is a positive thing for stocks as companies can borrow money cheaply and grow very quickly.
Although rising interest rates are bad for stocks, the opposite is true for bonds. When interest rates rise, the price of bonds decreases and the interest earned on the bonds increases.
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