1. Jeremy Smith, a Certified Financial Planner™, has scheduled a meeting with his client Claire Byrum, a sixty five year old widow. In it, he fields questions from her concerning Tallinvest, a market neutral hedge fund specializing in fundamental research of companies in the Baltic states of Lithuania, Latvia and Estonia. In framing his discussion, he advises her of several risks with which she, a dollar based investor, needs to be concerned. They are:
    1. Political Risk
    2. Inflation Risk
    3. Currency Risk
    4. Business Risk
    1. i & ii
    2. i,iii & iv
    3. iii only
    4. i, ii, iii & iv
  2. A high net worth investor is considering the purchase of a municipal bond portfolio. The risk he would be most concerned about is:
    1. Reinvestment Risk
    2. Default Risk
    3. Business Risk
    4. Tax Risk
  3. Fixed income investments are subject to all of the following risks, except:
    1. Purchasing Power Risk
    2. Interest Rate Risk
    3. Liquidity Risk
    4. Sovereign Risk
    5. None of the above
  4. Compunet, a Silicon Valley start up company, went public several years ago. After experiencing a brief run-up in price in its first couple of years, its share price was flat and then dropped precipitously pursuant to an announcement by the vice-chairman that a widely anticipated product launch was scuppered due to production problems at its plant in St. Helens. This would be an example of what sort of risk?
    1. Marketability Risk
    2. Inflation Risk
    3. Business Risk
    4. Systematic Risk


Practice Questions 5 - 9

Related Articles
  1. Personal Finance

    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.
  2. Investing

    Systematic Risk

    Systematic risk, also known as volatility, non-diversifiable risk or market risk, is the risk everyone assumes when investing in a market. Think of it as the overall, aggregate risk that comes ...
  3. Managing Wealth

    Why Companies Need Risk Management

    Implementing risk management strategies can save an entire organization from failure. Is yours up to snuff?
  4. Financial Advisor

    The Importance of a Client's Risk Assessment

    Financial advisors and money managers must do a detailed risk assessment regarding each client before they can recommend a course of action.
  5. Financial Advisor

    Active Risk vs. Residual Risk: Differences and Examples

    Active risk and residual risk are common risk measurements in portfolio management. This article discusses them, their calculations and their main differences.
  6. Investing

    Understanding Market Risk

    Market risk is the chance that an investment’s value will decrease due to a factor that affects all investments across the market.
  7. Financial Advisor

    Impact Investing Funds: What are the Risks?

    Impact investing funds can carry risks unique to this asset class, including political risk, currency risk and exit risk.
  8. Financial Advisor

    Risk Tolerance Only Tells Half The Story

    Just because you're willing to accept a risk, doesn't mean you always should.
  9. Tech

    The Importance of Healthcare Risk Management

    Risk management is especially important in healthcare because human lives might be on the line. Here are some strategies to map out a plan.
Frequently Asked Questions
  1. What is arbitrage?

    Arbitrage is basically buying a security in one market and simultaneously selling it in another market at a higher price, ...
  2. What is the difference between upstream and downstream oil and gas operations?

    The closer to the end user a function or firm is, the further downstream it is said to be. Raw material extraction or production ...
  3. What is the difference between a capital expenditure and a revenue expenditure?

    Capital expenditures represent major investments of capital that a company makes to expand its business and generate additional ...
  4. What is the difference between revenue and income?

    Revenue is simply the total amount of cash generated by the sale of products or services associated with the company's primary ...
Trading Center