Question

1. Explain all the following risk types and make an example about each of these cases. Please also provide a detail explanation how these types of risks may interact with each other under certain circumstance. a. credit risk b. interest rate risk c. foreign exchange risk d. country or sovereign risk e. technology risk f. market risk g. liquidity risk I need help with the second part of the question, "please provide a detailed explanation..."

Answer 1

credit risk is the risk that if we lend any amount to borrower then that amount will not be received back and not the interest also that is the default made by the borrower in repayment. this risk should be as minimum as possible. it is kind of that we calculate the probability of not receiving repayments.

interest rate risk means that the rate of interest will change due to which investment value changes resulting in negative value of investment. lesser the risk more is certainity.

foreign exchange risk is the financial risk that exists when a financial transaction is denominated in a currency other than that of base currency of the company due to which value of investment changes which may result in decrease in value of investment.

country risk is the risk that government could make default on its debt or other obligations. IT is the risk associated with investment in particular country or providing funds to the government of that particular country and that government makes default in repayment resulting into the loss of funds to the lender government country.

technology risk is the risk that supposeb if we adopt any new technology or develop any new technology for working in our organization with huge research and development cost and that technology becomes outdated soon which creates the barrier in working and the heavy ependiture made becomes worthless and again new technology needs to be adopted with again huge expenditure.