Youve 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 descriptions, but there is only one possible answer for each description.)

options:

business risk

financial risk

interest rate risk

liquiditiy risk

market risk

purchasing power risk

Description	Primary Risk
Real estate can be a valuable investment in times of price inflation, the higher the price level, the greater the value of the property. If the general price level declines, however, these investments can lose significant value.
In some markets there are many buyers and sellers, such that it is relatively easy to cash-in an investment at any given time. In thin markets, however, it may be difficult to find a buyer in a timely manner, forcing the seller to lower the price and lose money on the investment.
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 companys latest product contained a glitch, investors rushed to sell their shares, causing a sharp decline in the stock price.