SIE practice questionmediumLiquidity risk
An investor in thinly-traded small-cap stocks is concerned about which risk when selling?
- AReinvestment risk
- BInflation risk
- CLiquidity risk✓ Correct answer
- DBusiness risk
Explanation
Why C — Liquidity risk
Small-cap stocks often have less trading volume, making them harder to sell at a fair price—this is liquidity risk. The other risks do not directly relate to marketability.
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