The risk an investor is most likely to encounter when investing in a Standard & Poor’s 500 Index fund is:

By Peter Cherewyk AAA

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.


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