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Question : ___________ is the risk associated with the loss of purchasing power due to inflation.

 

Option 1: Inflation risk

Option 2: Credit risk

Option 3: Market risk

Option 4: Liquidity risk


Team Careers360 13th Jan, 2024
Answer (1)
Team Careers360 16th Jan, 2024

Correct Answer: Inflation risk


Solution : The correct answer is (a) Inflation risk

Inflation risk refers to the risk associated with the loss of purchasing power due to inflationary pressures in the economy. It is the risk that the value of money or the future cash flows generated by an investment will decrease in real terms over time.

Inflation risk affects various aspects of an individual's or investor's financial life. It can impact the returns on fixed-income investments, such as bonds or savings accounts, as the interest earned may not keep pace with inflation. Similarly, it can affect the real returns on investment portfolios, as the growth in asset values may not be sufficient to offset the impact of inflation.

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