What disadvantages are associated with fixed income securities?

The answer is correct because fluctuations in bond prices are indeed a significant disadvantage of fixed income securities. When interest rates rise, the prices of existing bonds typically fall; this occurs because newer bonds are issued at higher interest rates, making older bonds less attractive. This leads to potential capital losses for investors who might want or need to sell their bonds before maturity. The value of a bond may fluctuate considerably in the secondary market based on various factors, including changes in interest rates, economic conditions, and the creditworthiness of the issuer. Thus, if an investor needs to sell the bond before it matures, they may receive less than their original investment, resulting in a capital loss.

The other choices discuss important concepts related to fixed income securities but do not directly represent disadvantages. For instance, while it's true that investors are exposed to interest rate risk, this is a general characteristic of fixed income investing and doesn't imply a disadvantage in the same way that potential capital losses do. Similarly, the coupon rate being variable in some securities is a feature rather than a drawback, and the idea that secured interests are guaranteed is not universally applicable, especially since various forms of fixed income securities come with different levels of risk and security. Therefore, fluctuations in bond prices stand out as a direct