The risk that purchasing power will be lost while the loan is at the borrower's disposal - answer-Inflation risk
The probability of loss from actions of governments, such as changes in tax laws or environmental regulations or expropriation of assets - answer-Political risk
The risk of loss be...
The amount received by an investor as compensation for accepting the risk of
investment - answer-Return
What is the formula for Return on Investment? - answer-Amount received - Amount
invested
A percentage of the amount invested - answer-Rate of return
What is the formula for Rate of Return? - answer-Return on investment
-------------------------
Amount invested
The risk that is caused by changes in the economy, such as inflation or the business
cycle - answer-Systematic risk
What are two other names for systematic risk? - answer-Market risk
Undiversifiable risk
Risk that is inherent in a particular investment - answer-Unsystematic risk
What are two other names for Unsystematic risk? - answer-Unique risk
Company risk
What is unsystematic risk determined by? - answer-Firm's industry
Products
Customer loyalty
Degree of leverage
Management competence
The risk that the borrower will default and not be able to repay principal or interest -
answer-Credit default risk
How is credit default risk estimated? - answer-By credit rating agencies
The risk that a security cannot be sold on short notice for its market value - answer-
Liquidity risk
The risk that an investment security will fluctuate in value between the time it was
issued and its maturity date - answer-Maturity risk
What is another name for maturity risk? - answer-Interest rate risk
The longer the time until maturity...... - answer-The greater the degree of maturity
risk
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