If price of municipal bonds suddenly changes because of an unexpected interest rate change then investment bank

A. faces a high profit

B. faces a loss

C. face a inflation

D. face an index risk

Answer: Option B

Solution(By Examveda Team)

If price of municipal bonds suddenly changes because of an unexpected interest rate change then investment bank faces a loss. Municipal bonds are loans investors make to local governments. They are issued by cities, states, counties, or other local governments. For that reason, the interest they pay on the bonds is tax-free.