#1
Which of the following is NOT a type of investment risk?
Profit risk
ExplanationProfit risk is not typically considered a standalone investment risk.
#2
What does 'market risk' refer to in investment?
Risk of losing money due to fluctuations in the overall market
ExplanationMarket risk arises from overall market movements affecting investment values.
#3
Which of the following statements is true regarding diversification?
It decreases investment risk
ExplanationDiversification spreads investment across different assets, reducing overall risk.
#4
What is 'systematic risk'?
Risk inherent to the entire market or market segment
ExplanationSystematic risk affects the market as a whole rather than specific assets.
#5
What is 'volatility' in the context of investment?
Measure of how rapidly the market price of a security changes
ExplanationVolatility indicates the degree of fluctuation in a security's price over time.
#6
What does 'liquidity risk' refer to?
Risk of not being able to convert an investment to cash quickly
ExplanationLiquidity risk arises when assets cannot be sold or converted into cash swiftly.
#7
Which of the following is a strategy to mitigate investment risk?
Regularly rebalancing investment portfolio
ExplanationRegularly rebalancing ensures investments align with risk tolerance and goals.
#8
Which of the following factors can influence interest rate risk?
Economic conditions
ExplanationInterest rate risk is influenced by economic factors such as inflation and growth.
#9
What is 'counterparty risk'?
Risk of the other party in a financial transaction defaulting
ExplanationCounterparty risk involves the possibility of the party you transact with failing to fulfill obligations.
#10
How does 'political risk' affect investments?
It increases uncertainty and can lead to losses
ExplanationPolitical risk introduces uncertainty, potentially impacting investment returns negatively.