A(n)_____ Risk Can Be Defined as the Likelihood That a Trading

question 43

Multiple Choice

A(n) _____ risk can be defined as the likelihood that a trading partner will opportunistically break a contract or expropriate property rights.

• A) political
• B) legal
• C) economic
• D) sociological
• E) cultural

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Definitions:

Credit Ratings

Assessments made by credit rating agencies regarding the creditworthiness of an issuer of certain types of debt, including corporations and government entities, impacting interest rates and terms of loans.

Call Provision

A clause in a bond or other fixed-income security agreement that allows the issuer to repurchase and retire the debt before its maturity date, typically at a premium price.

Redeem Provision

A clause in a financial contract allowing the holder to exchange a particular financial instrument under specified conditions, often before maturity.

Investment-Grade Bonds

Bonds that are rated by credit rating agencies as having a lower risk of default, making them a safer investment.