Financial Risk Management, 2026 – Study Material and
Practice Questions
The amount received by an investor as compensation for accepting the risk of investment -
correct answer ✔✔ Return
What is the formula for Return on Investment? - correct answer ✔✔ Amount received - Amount
invested
A percentage of the amount invested - correct answer ✔✔ Rate of return
What is the formula for Rate of Return? - correct answer ✔✔ Return on investment
-------------------------
Amount invested
The risk that is caused by changes in the economy, such as inflation or the business cycle -
correct answer ✔✔ Systematic risk
What are two other names for systematic risk? - correct answer ✔✔ Market risk
Undiversifiable risk
Risk that is inherent in a particular investment - correct answer ✔✔ Unsystematic risk
What are two other names for Unsystematic risk? - correct answer ✔✔ Unique risk
Company risk
What is unsystematic risk determined by? - correct answer ✔✔ Firm's industry
, Products
Customer loyalty
Degree of leverage
Management competence
The risk that the borrower will default and not be able to repay principal or interest - correct
answer ✔✔ Credit default risk
How is credit default risk estimated? - correct answer ✔✔ By credit rating agencies
The risk that a security cannot be sold on short notice for its market value - correct answer ✔✔
Liquidity risk
The risk that an investment security will fluctuate in value between the time it was issued and
its maturity date - correct answer ✔✔ Maturity risk
What is another name for maturity risk? - correct answer ✔✔ Interest rate risk
The longer the time until maturity...... - correct answer ✔✔ The greater the degree of maturity
risk
The risk that purchasing power will be lost while the loan is at the borrower's disposal - correct
answer ✔✔ Inflation risk
The probability of loss from actions of governments, such as changes in tax laws or
environmental regulations or expropriation of assets - correct answer ✔✔ Political risk
Practice Questions
The amount received by an investor as compensation for accepting the risk of investment -
correct answer ✔✔ Return
What is the formula for Return on Investment? - correct answer ✔✔ Amount received - Amount
invested
A percentage of the amount invested - correct answer ✔✔ Rate of return
What is the formula for Rate of Return? - correct answer ✔✔ Return on investment
-------------------------
Amount invested
The risk that is caused by changes in the economy, such as inflation or the business cycle -
correct answer ✔✔ Systematic risk
What are two other names for systematic risk? - correct answer ✔✔ Market risk
Undiversifiable risk
Risk that is inherent in a particular investment - correct answer ✔✔ Unsystematic risk
What are two other names for Unsystematic risk? - correct answer ✔✔ Unique risk
Company risk
What is unsystematic risk determined by? - correct answer ✔✔ Firm's industry
, Products
Customer loyalty
Degree of leverage
Management competence
The risk that the borrower will default and not be able to repay principal or interest - correct
answer ✔✔ Credit default risk
How is credit default risk estimated? - correct answer ✔✔ By credit rating agencies
The risk that a security cannot be sold on short notice for its market value - correct answer ✔✔
Liquidity risk
The risk that an investment security will fluctuate in value between the time it was issued and
its maturity date - correct answer ✔✔ Maturity risk
What is another name for maturity risk? - correct answer ✔✔ Interest rate risk
The longer the time until maturity...... - correct answer ✔✔ The greater the degree of maturity
risk
The risk that purchasing power will be lost while the loan is at the borrower's disposal - correct
answer ✔✔ Inflation risk
The probability of loss from actions of governments, such as changes in tax laws or
environmental regulations or expropriation of assets - correct answer ✔✔ Political risk
