Which of the Following Statements About the Various Kinds of Risks

question 39

Multiple Choice

Which of the following statements about the various kinds of risks and their associated market reward is true?

• A) Liquidity risk is a market risk, hence not rewarded by the market.
• B) Default risk is a firm-specific risk, hence rewarded by the market.
• C) Exchange rate risk is a diversifiable risk, hence not rewarded by the market.
• D) Inflation risk is an unsystematic risk, hence not rewarded by the market.
• E) Interest rate risk is a systematic risk, hence rewarded by the market.

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Definitions:

Equations

Mathematical statements asserting the equality between two expressions.

Consistent

In mathematics, systems of equations are considered consistent if they have at least one set of solutions.

Consistent

In mathematics, particularly in systems of equations, it refers to a system that has at least one solution.

Inconsistent

A term describing systems of equations that have no solution, as their lines or planes do not intersect.