Question
There are a number of characteristics that make securities desirable to investors. This includes negotiability which reflects the ability to transfer the security from one
There are a number of characteristics that make securities desirable to investors. This includes negotiability which reflects the ability to transfer the security from one holder to another, and liquidity which enables securities to be easily sold when required. The third characteristic that affects the attractiveness of securities is their risk. Which of the following is least likely to be one of the three major categories of risk that affect the attractiveness of securities?
a. Exchange rate risk: which is the risk arising from fluctuations in the value of a base currency against a foreign currency.
b. Capital value risk: which is the risk of a capital gain or loss on the security.
c. None of the answers are correct.
d. Inflation risk: which is the risk that the real value of the return on the security will be eroded by inflation.
e. Default risk: which is the risk that the issuer fails to meet the commitments made in the security.
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