Answer (D) is correct . Liquidity risk is the possibility that an asset cannot be sold on short notice for its market value. If an asset must be sold at a high discount, it is said to have a substantial amount of liquidity risk.
Answer (A) is incorrect because Interest-rate risk is caused by fluctuations in the value of an asset as interest rates change. Its?components are price risk and reinvestment-rate risk.
Answer (B) is incorrect because Purchasing-power risk is the risk that a general rise in the price level (inflation) will reduce what can be purchased with a fixed sum of money.
Answer (C) is incorrect because Financial risk is the risk borne by shareholders, in excess of basic business risk that arises from use of financial leverage (issuance of fixed income securities, i.e., debt and preferred stock).
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