Which of the following would be considered a specific risk factor for a debt mutual fund scheme?
A
Market risk
B
Interest rate risk
C
Inflation risk
D
Political risk
Correct Option:
B
Explanation
Interest rate risk is a key risk specific to debt mutual fund schemes. When market interest rates change, the prices of existing debt securities move in the opposite direction, affecting the Net Asset Value (NAV) of the fund. Generally, longer-duration debt securities are more sensitive to interest rate changes than shorter-duration securities.
