A:

A. Regulatory risk.

B. Market risk.

C. Liquidity risk.

D. Business risk.






Correct answer: B

Business risk is minimized with a diversified fund, and liquidity is not an issue for a fund that redeems shares each day at the NAV. But an index fund cannot protect an investor from market risk.



RELATED FAQS
  1. The risk an investor is most likely to face when investing in a discounted U.S. Treasury ...

    a. Call risk b. Reinvestment riskc. Credit riskd. Purchasing power risk Answer: Bbecause call risk would apply more often ... Read Answer >>
  2. The risk an investor is most likely to face when investing in a discounted U.S. Treasury ...

    a. Call risk b. Reinvestment risk c. Credit risk d. Purchasing power risk Answer: Bbecause call risk would apply more often ... Read Answer >>
  3. What is liquidity risk?

    Learn how to distinguish between the two broad types of financial liquidity risk: funding liquidity risk and market liquidity ... Read Answer >>
  4. When are mutual fund orders executed?

    Discover when and how mutual fund shares are bought and sold each day, and find out how price is determined and when the ... Read Answer >>
Related Articles
  1. Investing

    4 Factors to Know About Money Market Reform in 2016 (FII, BAC)

    Learn more about the impending implementation of the money market fund reform, including how it impacts individual and institutional investors.
  2. Insights

    What is Liquidity Risk?

    Liquidity risk is the risk of being unable to sell an asset fast enough to avoid loss.
  3. Investing

    Understanding Liquidity Risk

    Learn about the two types of liquidity risk: funding liquidity risk and market liquidity risk.
  4. Investing

    Liquidation Blues: When Mutual Funds Close

    Underperforming funds often close their doors, leaving investors down and out.
  5. Investing

    Mutual Fund Or ETF: Which Is Right For You?

    Learn the differences between these investment products and how to take full advantage.
  6. Investing

    Trading Mutual Funds For Beginners

    Learn about the basics of trading and investing in mutual funds. Understand how the fees charged by mutual funds can impact the performance of an investment.
  7. Investing

    Understanding Liquidity Risk

    Make sure that your trades are safe by learning how to measure the liquidity risk.
  8. Investing

    The Hidden Differences Between Index Funds

    These funds don't all match index returns. Find out how to avoid costly surprises.
RELATED TERMS
  1. Money Market Fund

    An investment fund that holds the objective to earn interest ...
  2. Index Fund

    An index fund is a type of mutual fund with a portfolio constructed ...
  3. Investment Fund

    A supply of capital belonging to numerous investors that is used ...
  4. Target Risk Fund

    A fund that attempts to expose its investors to a specified amount ...
  5. Liquidity Risk

    The risk stemming from the lack of marketability of an investment ...
  6. Open-End Fund

    A type of mutual fund that does not have restrictions on the ...
Hot Definitions
  1. Universal Health Care Coverage

    An organized healthcare system that provides healthcare benefits to all persons in a specified region. Many countries, such ...
  2. Davos World Economic Forum

    The annual meeting of the World Economic Forum hosted at Davos—a small ski town in Switzerland—in January each year is among ...
  3. Smart Home

    A convenient home setup where appliances and devices can be automatically controlled remotely from anywhere in the world ...
  4. Efficient Frontier

    A set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the ...
Trading Center