click below
click below
Normal Size Small Size show me how
SIE Unit 14
| Question | Answer |
|---|---|
| Market Risk | Risk that the overall market declines, affecting most securities |
| Business Risk | Risk that a company performs poorly because of its business operations |
| Financial Risk | Risk that a company cannot meet its debt obligations because it has borrowed too much |
| Credit Risk/Default risk | Risk that a bond issue will fail to pay interest or principal (default risk) |
| Interest rate risk | Bond prices fall when interest rates risk |
| Inflation risk (Purchasing power risk) | Inflation reduces the buying power of investment returns |
| Reinvestment risk | Risk that future interest or principal must be reinvested at lower interest rates |
| Liquidity Risk | Risk that an investment cannot be sold quickly without losing value |
| Call risk | Risk that a callable bond will be redeemed before maturity usually when interest rates fall |
| Prepayment risk | risk that loans or mortgages will be paid off early, reducing expected interest income |
| Extension tisk | risk that mortgage repayments slow when interest rates risk extending the investment's life |
| Political Risk | government actions or instability negatively affect investment returns |
| currency risk (Exchange rate) | foreign currency changes affect investment returns |
| Legislative risk | laws or regulations change can negatively impact investments |
| Regulatory risk | government or regulatory actions affect an investment or company |
| Capital risk | Risk of losing some or all of the original investment |
| Systematic risk | market wide risk that cannot be diversified away |