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 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 >>
  5. 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 >>
  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. Personal Finance

    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

    6 Proven Tips For Series 6 Success

    These techniques can help you pass this test without the added stress.
  4. Personal Finance

    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.
  5. Personal Finance

    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.
  6. Insights

    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. Trading

    Introduction To Level II Quotes

    Find out what's happening in a given stock with this service showing Nasdaq market makers' best bid and ask prices.
  8. Personal Finance

    What To Expect On The CFA Level II Exam

    This article will help you understand the nuances of the CFA Level II exam.
  9. Investing

    Basel II Accord To Guard Against Financial Shocks

    Problems with the original accord became evident during the subprime crisis in 2007.
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. Basel III

    A comprehensive set of reform measures designed to improve the ...
  4. Type II Error

    A statistical term used within the context of hypothesis testing ...
  5. Base II

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

    An integrated information system used by businesses. Manufacturing ...
Hot Definitions
  1. Co-pay

    A type of insurance policy where the insured pays a specified amount of out-of-pocket expenses for health-care services such ...
  2. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  3. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  4. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
  5. Investment

    An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
  6. Redlining

    The unethical practice whereby financial institutions make it extremely difficult or impossible for residents of poor inner-city ...
Trading Center