Financial Risks

What is credit risk?

• The risk of losing a job due to economic downturn

• The risk of losing money in the stock market

• The risk of a company going bankrupt

• Potential loss faced by a lender or investor if a borrower fails to repay a loan or meet financial obligations.

What is an example of a potential risk associated with liquidity?

• Investing in a highly diversified portfolio

• Holding cash in a savings account

• Holding a large position in a thinly traded stock

• Purchasing a government bond

What is interest rate risk?

• The risk of inflation affecting investment value.

• The risk of default on loan payments due to interest rate changes.

• Potential impact of interest rate changes on investment value.

• The risk of losing money due to changes in interest rates.

Which of the following is an example of credit risk?

• Paying off a loan on time

• Investing in a low-risk mutual fund

• Opening a savings account

• Defaulting on a loan

What is market risk?

• The potential for losses in investments due to economic factors.

• The potential for gains in investments due to market factors.

• The potential for losses in investments due to individual factors.

• The potential for losses in investments due to market factors.

Which of the following is an example of operational risk?

• A bank experiencing a system failure

• A bank experiencing a decrease in customer satisfaction

• A bank experiencing a decrease in interest rates

• A bank experiencing a cyber attack

What is liquidity risk?

• The risk of a company going bankrupt.

• The risk of losing all of your invested capital.

• The possibility that an asset cannot be traded quickly enough in the market without causing a significant change in its price.

• The risk of a sudden increase in interest rates.

Which of the following is an example of interest rate risk?

• Increase in bond value due to increase in interest rates

• Decrease in bond value due to increase in interest rates

• Increase in bond value due to decrease in interest rates

• Decrease in bond value due to decrease in interest rates

What is the meaning of interest rate risk?

• The risk of inflation affecting investment value.

• The risk of default on loan payments due to interest rate changes.

• Potential impact of interest rate changes on investment value.

• The risk of losing money due to changes in interest rates.