SIE practice questioneasyMarket risk
An investor owns shares in a broad stock market index fund. If the market as a whole experiences a sharp decline due to economic troubles, the investor is primarily exposed to which type of risk?
- AMarket risk✓ Correct answer
- BCredit risk
- CLiquidity risk
- DCall risk
Explanation
Why A — Market risk
Market risk refers to the risk of losses due to overall market movements. Credit risk and call risk apply mainly to debt securities, and liquidity risk is about selling assets quickly at a fair price.
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