Types of investment risk

Understanding the Risks and Rewards of Investing

You've heard that investing can be risky, but what exactly are the risks? Why do some investments succeed while others fail?

The following examples demonstrate some of the potential pitfalls your investments might encounter.

Select the primary type of investment risk that corresponds to each of the given descriptions. $($Hint: These are not necessarily complete descr but there is only one possible answer for each description.$)$

Description

Prior to $2008-2009,$ the shoe company Runner's High had been growing at a steady pace, expanding its product line and entering markets in new regions. When the recession hit, however, inventories piled up as sales declined, such that the company was unable to make payments to some of its suppliers.

CompWhiz is a tech company that initially sparked investor enthusiasm, resulting in a dramatic rise in share value after the initial public offering. In response to a rumor that the company's latest product contained a glitch, investors rushed to sell their shares, causing a sharp decline in the stock price.

Government securities guarantee fixed payments and set intervals. If the demand for money declines, however, the value of these securities declines as well.