IFIC Mutual Funds Licensing Practice Exam · Question
Your client, Mr. Henderson, holds a substantial investment in corporate bonds issued by a single, smaller energy company. He is primarily concerned about the possibility that this company might default on its debt obligations. What specific risk is Mr. Henderson worried about?
Credit risk is the risk that a bond issuer, or any borrower, will be unable to make its promised interest payments or repay the principal amount. Focusing on a
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Question: Your client, Mr. Henderson, holds a substantial investment in corporate bonds issued by a single, smaller energy company. He is primarily concerned about the possibility that this company might default on its debt obligations. What specific risk is Mr. Henderson worried about?
Answer options: ✅ Credit Risk
- Liquidity Risk
- Interest Rate Risk
- Market Risk
Correct answer: Credit Risk
Explanation: Credit risk is the risk that a bond issuer, or any borrower, will be unable to make its promised interest payments or repay the principal amount. Focusing on a single company's ability to pay directly relates to credit risk.
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