Question
Question 23 Which of the following is considered a market risk: failure to meet debt obligations. changes in market interest rates. internal fraud and human error. 3 pts
Answer
4.6
(340 Votes)
Douglas
Elite · Tutor for 8 years
Answer
Therefore, the answer is "changes in market interest rates" as it pertains to market risk.
Explanation
## Step 1: Understanding the Concept of Market RiskMarket risk, also referred to as systematic risk, pertains to the vulnerability of investments or securities to overall disturbances in the financial market or economy, which is commonly outside the investors' control.## Step 2: Analyzing the Options1. Failure to meet debt obligations: This is commonly associated with credit risk, which deals with the probability of the counterparty's failure to meet its debt obligations.2. Changes in market interest rates: This poses market risk as variations in the market interest rates directly influence the value of many investments. For example, if interest rates rise, the price of bonds in the market usually drops.3. Internal fraud and human error: These are generally referred to as operational risks arising out of inadequate or failed internal processes.