Series 65: Unit 19 Quiz 2

Which of the following is a risk common to all fixed-income securities? A. Liquidity risk B. Market risk C. Interest rate risk D. Opportunity cost

Interest rate risk

John purchased stock of a company in the business of manufacturing yachts. Two years ago his securities had lost most of their value as a result of a congressionally imposed luxury tax on purchases of more than $30,000. John's investment in the yacht-building business suffered a loss due to A. regulatory risk B. legislative risk C. volatility D. business risk

Legislative risk

Prior to the opening of the securities markets, KAPCO Chemical Corporation reports quarterly earnings per share of $1.50, exceeding analysts' estimates by more than 10%. By the end of the trading session, KAPCO's stock price has fallen by 5%. This would be an example of A. market risk B. regulatory risk C. opportunity cost D. financial risk

Market risk

Steve and Haley, ages 48 and 45, respectively, invest in large-cap stocks, international stock mutual funds, and real estate. They consider themselves moderately aggressive investors. Their investment portfolio is subject to all of the following risks except A. business risk. B. default risk. C. systematic risk. D. currency risk.

Default risk

The risk that the value of an investment in a limited partnership will decline because of a change in tax law that disallows favored tax treatment for oil exploration costs is called A. interest rate risk B. market risk C. legislative risk D. liquidity risk

Legislative risk

The uncertainty resulting from the possibility that the value of an investment will be affected by a change in the law is known as A. legislative risk B. credit risk C. market risk D. business risk

Legislative risk

The risk of not being able to convert an investment into cash at a time when cash is needed is what type of risk? A. Reinvestment B. Legislative C. Market D. Liquidity

Liquidity

You have a 45-year-old client wishing to save for retirement. The client does not have a great deal of investment sophistication and inquires about the risks you have exposed him to by placing the majority of his portfolio in listed common stocks. You would respond that one risk that should not be a concern to this investor is A. business risk. B. inflation risk. C. systematic risk. D. liquidity risk.

Liquidity risk

A country decides to nationalize its sugar industry. This is an example of A. sovereign risk. B. business risk. C. financial risk. D. political risk.

Political risk

A risk-averse client, living in the United States, holding a high proportion of his assets in cash and cash equivalents in U.S. dollars, is exposed to which of the following risks? A. Exchange rate risk B. Market risk C. Purchasing power risk D. Reinvestment rate risk

Purchasing power risk

An investor has bonds maturing in three weeks on the first day of the upcoming month. Since his purchase of the bonds five years ago, interest rates have fallen. To which one these risks are these bonds most likely to be subject? A. Interest rate risk B. Default risk C. Purchasing power risk D. Reinvestment risk

Reinvestment risk

Which 2 are most associated with a U. S. Treasury bond? 1. Credit risk 2. Liquidity risk 3. Reinvestment risk 4. Interest rate risk

Reinvestment risk and interest rate risk