A:

I. It is mitigated by writing calls.



II. It includes the risk the investor will lose invested principal.



III. It is the same as systemic risk.



IV. It is mitigated by buying defensive stocks.



A. I only

B.
II only

C.
II and III

D.
III and IV






Correct answer: B



Statement II describes capital risk not market risk.



RELATED FAQS
  1. Which statements about common shareholder rights are FALSE? I. A shareholder may ...

    The correct answer is a. I should be the the other way around: convertible bond holders can exchange their bonds for shares. ... Read Answer >>
  2. A margin account has a long market value of $12,000, a debit balance of -$6,000 ...

    The correct answer is a. I is correct since the stock's currently valued at $12,000 are increasing 20% or $2,400. II is incorrect ... Read Answer >>
  3. Which of the following statements is (are) true with respect to setting the proper ...

    The correct answer is: d) Choice II is incorrect because the longer the investment horizon, the less emphasis must be placed ... Read Answer >>
  4. Which of the following are tools that are employed by the Federal Reserve in its ...

    I. Moral suasionII. Changing the discount rateIII. Changing the reserve requirementIV. Changing the prime interest rate A. ... Read Answer >>
  5. Which of the following signatures are required on a client’s new account form ... ...

    The correct answer is B. While local practices of a broker-dealer might require the client to sign the form, even when opening ... Read Answer >>
  6. Which TWO statements are TRUE about writing covered calls? I ...

    The correct answer is c) I is incorrect because there is no margin requirement. III is incorrect because a call writer must ... Read Answer >>
Related Articles
  1. Trading

    Introduction To Level II Quotes

    Level II quotes show a ranked list of the best bid and ask prices from each market participant, providing detailed insight into a stock’s price action.
  2. Professionals

    Tips for Taking the CFA Exam: Part 1

    Peter Mackey, head of exam development for the CFA Institute, shares his tips for taking the CFA level I, II and III exams.
  3. Financial Advisor

    Tips for Taking the CFA Exam: Part 2

    Peter Mackey, head of exam development for the CFA Institute, shares his tips for passing the CFA level I, II and III exams.
  4. Markets

    Mitigation Trade: Making Up For Environmental Harm

    Mitigation banking is a system by means of which the liability of ecological damage is transferred from the permittee to the mitigation banker through a system of credits and debits under regulatory ...
  5. Markets

    What is Basel II?

    Basel II refers to the second of a set of international banking rules passed by the Basel Committee on Banking Supervision.
  6. Managing Wealth

    How to Invest In Developing Markets

    Developing markets can be attractive additions to many investor's portfolios, but carry additional risks that must be considered.
  7. Managing Wealth

    Risk Management Framework (RMF): An Overview

    A company must identify the type of risks it is taking, as well as measure, report on, and set systems in place to manage and limit, those risks.
  8. Managing Wealth

    Understanding The Basel III International Regulations

    The Basel III regulations mark a drastic reform in international banking. But how do they impact the future's investment landscape?
  9. Investing

    How to Create a Personal Risk Management Plan

    Investors should consider these strategies to establish a risk management plan.
  10. Managing Wealth

    What is Risk Management?

    Risk management is the process of assessing, managing and also mitigating losses. For investors, risk management is where an investor assesses the potential for loss in an investment, or portfolio ...
RELATED TERMS
  1. Schedule II Bank

    A bank which is a subsidiary of a foreign bank and authorized ...
  2. Basel II

    A set of banking regulations put forth by the Basel Committee ...
  3. Price Risk

    The risk of a decline in the value of a security or a portfolio. ...
  4. Base II

    A data processing network operated by Visa USA for the clearing ...
  5. Manufacturing Resource Planning - MRP II

    An integrated information system used by businesses. Manufacturing ...
  6. Real Estate Tier Classifications: Tier 1, Tier 2, and Tier 3

    Cities are categorized as Tier I, Tier II, or Tier III depending ...
Hot Definitions
  1. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  2. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  3. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  4. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  5. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  6. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
Trading Center