Question

The risk that an unanticipated increase in liability withdrawals may cause an FI to have to sell assets at fire sale prices is an example of

technology risk

interest rate risk

liquidity risk

sovereign risk

credit risk

Answer 1

Option a, technology risk is the risk arising out of failure of technology.

Option b, interest rate risk is a risk arising from change in interest rates.

Option c, liquidity risk is the risk faced by the company in whose stock the investment is made and the difficulty in selling the security.

Option d, sovereign risk is the risk that a government of a country could default on sovereign debt.

Option e, credit risk is the risk that a borrower would default on required payments.

Henec, the answer is option c.

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