Which of the Following Risks Associated with Preferred Stocks or Government

question 50

Multiple Choice

Which of the following risks associated with preferred stocks or government or corporate bonds is a result of changes in rates in the economy?

• A) Inflation risk
• B) Interest rate risk
• C) Business failure risk
• D) Market risk
• E) Stock risk

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Definitions:

Rate of Inflation

The annual percentage rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan remaining.

Intertemporal Arbitrage

The action of taking advantage of price differences of the same asset in different time periods to generate profits.

Oil

A viscous liquid derived from petroleum, natural gas, or plants, used as fuel or as a base for lubricants and various manufacturing processes.