SIE Exam Question 40: Answer and Explanation

Question: 40

Which of the following statements is false regarding short selling?

• A. Money is made when prices fall.
• B. Short selling carries high risk and a limited return.
• C. Short selling carries low risk and an unlimited return.
• D. Money is lost when prices rise.

Correct Answer: C

Explanation:

Short selling does not carry low risk and an unlimited return. Short selling makes money when prices fall, it carries high risk, and it has a limited return. Short selling loses money when prices rise.