#1
What is a common risk associated with investing in stocks?
Market risk
ExplanationRisk stemming from fluctuations in the overall market.
#2
Which of the following best defines 'opportunity cost'?
The value of the next best alternative
ExplanationThe cost of forgoing the next best alternative when making a decision.
#3
What is the primary goal of risk management?
To minimize the impact of risks on achieving objectives
ExplanationReducing the adverse effects of potential events on goals.
#4
Which of the following is NOT a type of financial risk?
Inflation risk
ExplanationRisk stemming from changes in purchasing power.
#5
What is 'diversification' in the context of investment?
Spreading investments across different assets to reduce risk
ExplanationMinimizing risk by investing in varied assets.
#6
What does 'VAR' stand for in risk management?
Value at Risk
ExplanationA measure of potential loss under adverse conditions.
#7
Which risk management strategy involves spreading investments across different assets?
Diversification
ExplanationReducing risk by investing in a variety of assets.
#8
Which type of risk refers to the possibility of loss due to changes in interest rates?
Interest rate risk
ExplanationRisk arising from interest rate fluctuations.
#9
In project management, what is 'mitigation'?
Reducing the impact of risks
ExplanationTaking actions to lessen the effects of potential risks.
#10
Which of the following is NOT a category of risk in enterprise risk management?
Leverage risk
ExplanationRisk stemming from financial leverage.
#11
What is 'black swan' theory in risk management?
A rare event with extreme consequences
ExplanationAn unexpected event with significant impact.
#12
What does 'CVA' stand for in finance?
Credit Valuation Adjustment
ExplanationAn adjustment made to the value of a financial instrument.
#13
What is 'tail risk' in finance?
The risk of an extreme event occurring
ExplanationRisk associated with rare, unexpected events.