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Types of Business Risk

Total questions: 20

Worksheet time: 7mins

Name
Class
Date
1.

Market risk refers to the fact that

a)

market prices are continually in a state of change.

b)

market rates are continually in a state of change.

c)

market prices and rates are continually in a state of change.

d)

market sentiments are continually in a state of change.

2.

If market interest rates rise, the value of bonds will

a)

be significant

b)

be equal to zero

c)

increase

d)

decrease

3.

Equity price risk refers to

a)

the volatility of currencies prices

b)

the volatility of market prices

c)

the volatility of stock prices

d)

the volatility of oil prices

4.

general market risk and specific risk are two components of

a)

Foreign exchange risk

b)

Equity price risk

c)

Commodity price risk

d)

Credit Risk

5.

General market risk _______ be diversified away, while specific risk ________be mitigated

a)

cannot______ can

b)

can ______cannot

c)

cannot______ cannot

d)

can ______can

6.

Commodity price risk refers to the price volatility of

a)

Stocks, bonds, and securities

b)

Com services

c)

currencies

d)

precious metals, base metals, agricultural products, energy

7.

The lack of trading liquidity tends to ___________the amount of price volatility

a)

decrease

b)

increase

c)

compensate

d)

deteriorate

8.

a loss suffered by a party whereby the counterparty fails to meet its contractual obligations is a

a)

Business and Strategic Risk

b)

Liquidity risk

c)

Credit Risk

d)

Legal and Regulatory Risk

9.

The potential nonpayment of interest and/or principal on a loan by the borrower is a

a)

Business and Strategic Risk

b)

Liquidity risk

c)

Reputation risk

d)

Default risk

10.

The chance that a counterparty will stop operating completely is a

a)

Business and Strategic Risk

b)

Bankruptcy risk

c)

Reputation risk

d)

Default risk

11.

The possibility that the credit rating of a bond or other debt instrument may be lowered by a credit rating agency, leading to a decrease in the bond's value is a

a)

Business and Strategic Risk

b)

Bankruptcy risk

c)

Downgrade risk

d)

Default risk

12.

also known as delivery risk or counterparty risk is a

a)

Settlement risk

b)

Bankruptcy risk

c)

Downgrade risk

d)

Default risk

13.

the possibility that a firm may not be able to meet its short-term financial obligations due to difficulties in obtaining funding in the market is a

a)

Settlement risk

b)

Bankruptcy risk

c)

Downgrade risk

d)

Funding liquidity risk

14.

the possibility that an investor may not be able to buy or sell an asset quickly enough or at a fair price due to a lack of market participants or market conditions is a

a)

Settlement risk

b)

Bankruptcy risk

c)

Market liquidity risk

d)

Funding liquidity risk

15.

refers to potential losses flowing from inadequate (or failed) internal processes, human error, or an external event is a

a)

Settlement risk

b)

Bankruptcy risk

c)

Market liquidity risk

d)

Operational risk

16.

the potential for litigation to create uncertainty for a firm is a

a)

Legal risk

b)

Regulatory Risk

c)

Market liquidity risk

d)

Operational risk

17.

involves the uncertainty stemming from actions taken by governmental entities, which can significantly impact businesses or financial transactions, is a

a)

Legal risk

b)

Regulatory Risk

c)

Market liquidity risk

d)

Operational risk

18.

refers to variability in inputs that influence either revenues

(e.g., customer demand trends, product pricing policies, etc.) or cost structures, is a

a)

Legal risk

b)

Regulatory Risk

c)

Business risk

d)

Operational risk

19.

involves long-term decision making about fundamental business strategy, is a

a)

Strategic risk

b)

Regulatory Risk

c)

Business risk

d)

Operational risk

20.

the danger that a firm will suffer a loss in public perception , is a

a)

Strategic risk

b)

Reputation risk

c)

Business risk

d)

Operational risk