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7. Tohonday, a motor vehicle production company, has historically channeled most of its earnings and spare cash into short-term government bonds maturing in less than a year. The board wishes to change its investment policy substantially and intends to tap the riskier but more profitable long-term bond market. Assuming you're the risk manager for the company, which of the following risks would be of utmost immediate) concern? A. Trading liquidity risk B. Funding liquidity risk C. Interest rate risk D. Market risk 8. Distinguish between expected loss and unexpected loss. A. Expected loss is the average credit loss we expect from an exposure while unexpected loss is the loss that occurs over and above the expected loss. B. Unexpected loss is the average credit loss we expect from an exposure while expected loss is the loss that occurs over and above the unexpected loss. C. Expected loss is the average credit loss that we would expect from an exposure while unexpected loss is the loss that would occur without a quantitative expression. D. Expected loss is the average credit loss that we would expect from an exposure while unexpected loss is the sum of expected losses from several time periods. 9. Which of the following statements best explains the relationship between risk and reward? A. As the risk increases, the reward decreases. B. As the risk decreases, the reward increases C. As the risk increases, the reward increases. D. The relation between risk and reward depends on the financial product. 10. Which of the following risks does not fall under the larger category of credit risk? A. Settlement risk B. Downgrade risk C. Upward risk D. Default risk 11. Which of the following combinations correctly matches a quantifiable risk with a non-quantifiable (qualitative) risk? A. Quantifiable: Interest rate risk; Non-quantifiable: Default risk B. Quantifiable: Civil war; Non-quantifiable: Liquidity risk C. Quantifiable: Equity price risk; Non quantifiable; Risk of terrorist attack D. Quantifiable: Civil war; Non-quantifiable: Settlement risk