SIE Exam Practice Question 107

Correct Answer: A

Explanation:

Systematic risk, also known as market risk, affects the entire market rather than a specific security or industry. Credit risk is the risk that a lender takes on, arising from the uncertainty of whether a borrower will be able to repay what they have been loaned. Liquidity risk is the risk that an investor, firm, or institution may suffer a capital loss from having to liquidate assets at an unfavorable time (e.g., selling off assets at lower prices because funds are needed immediately). Interest rate risk is the risk of investments losing value due to changes in prevailing interest rates.