PERSONAL FINANCIAL RISK MANAGEMENT

Question 1

defined in financial terms as the chance that an outcome or investment’s actual gains will differ from an expected outcome or return. Risk includes the possibility of losing some or all of an investment.

Answer 1

Risk

Question 2

refers to some type of physical injury, damage to property, or absence of property or other assets.

Answer 2

LOSS

Question 3

The likelihood of a risk actually resulting in a loss is called

Answer 3

PROBABILITY.

Question 4

means you could lose something of personal value to you.

Answer 4

PERSONAL RISK

Question 5

of identifying the potential downsides as well as the potential rewards of an investment.

Answer 5

RISK MANAGEMENT

Question 6

potential downsides in any investment decision and deciding whether to accept the risks or take measures to mitigate them.

Answer 6

FINANCIAL RISK MANAGEMENT

Question 7

is a serious kind of risk; it could jeopardize your future. With this type of risk, more than current income is threatened. You may lose your ability to earn in the future or assets you acquire in the future.

Answer 7

RISK OF FINANCIAL RESOURCES

Question 8

– refers to a cost in terms of money. The loss can be big or small. Small possible losses should be assessed differently from large possible losses.

Answer 8

RISK OF FINANCIAL LOSS

Question 9

– finding ways to change actions or events so that your chance for loss is less.

Answer 9

REDUCING RISKS

Question 10

you stop the behavior or avoid the situation that leads to the risks.

Answer 10

AVOIDING RISKS

Question 11

when you face substantial risk that you cannot or do not wish to reduce or avoid.

Answer 11

TRANSFERRING RISKS

Question 12

taking responsibility for potential harm to oneself or others

Answer 12

ASSUMING RISKS

Question 13

• Economic downturns or market crashes.

Answer 13

Systematic Risks.

Question 14

• Job Loss.
• Disability.

Answer 14

Unsystematic Risks.

Question 15

• Unexpected car repairs.

Answer 15

Short Term Risks.

Question 16

• A healthcare costs in retirement.

Answer 16

Long Term Risks.

Question 17

refers to the probability of a business losing value on its capital, i.e., liquid securities, factories, and equipment.

Answer 17

CAPITAL RISK

Question 18

refers to the likelihood of the government of another nation defaulting on its financial commitments.

Answer 18

COUNTRY RISK

Question 19

are about borrowers not being able to meet financial obligations. Specifically, meeting financial obligations when they become payable.

Answer 19

DEFAULT RISK

Question 20

refers to the possibility that macroeconomic conditions will affect an investment.

Answer 20

ECONOMIC RISK

Question 21

– exist in foreign currency transactions. Such risk is also possible when a foreign subsidiary of a company maintains financial statements in a different currency.

Answer 21

EXCHANGE RATE RISK

Question 22

refers to any counter-party in an agreement that cannot fulfill its obligations. Specifically, through failure to pay for or deliver assets as specified in an agreement.

Answer 22

DELIVERY OR SETTLEMENT RISK –

Question 23

– refers to the probability that the market interest rates will increase considerably. Specifically, significantly higher than the interest rate a party earned on investments such as bonds.

Answer 23

INTEREST RATE RISK

Question 24

– refers to the probability that a company cannot meet its debt obligations. Specifically, whether it -can only meet its obligations if it incurs unacceptably large losses.

Answer 24

LIQUIDITY RISKS

Question 25

– look at the likelihood of loss resulting from inadequate internal processes.

Answer 25

OPERATIONS RISK

Question 26

the exercise of political power is the root cause of political risks in the world of international business. How leaders exercise political power determines whether government actions threaten a company’s value.

Answer 26

POLITICAL RISK

Question 27

refers to the possibility that a borrower cannot borrow to repay current debts. Many lending arrangements include balloon payments at the end of the temptations.

Answer 27

REFINANCING RISK

Question 28

refer to the likelihood that a party may cancel or stop a particular investment. Additionally, the investor might not be able to find a similarly attractive alternative investment.

Answer 28

REINVESTMENT RISK

Question 29

this term focuses on the likelihood of a government defaulting on its sovereign debt or other financial obligation. It also refers to the risks investors run when investing in a specific country. These risks also exist when a party provides money to its government.

Answer 29

SOVEREIGN RISK

Question 30

involve the forecasting and evaluation of financial and business risks. It also includes identifying and implementing procedures and measures to avoid or minimize their potential harms.

Answer 30

RISK MANAGEMENT

Question 31

look at the likelihood that a party does not deliver a security or its value in money as agreed when the security was traded after the other party or parties have already delivered cash value or security as per the agreement.

Answer 31

SETTLEMENT RISK