SIE Exam Question 490: Answer and Explanation

Question: 490

A customer has a large position in GJH, a thinly traded stock whose share price has remained flat for some time. The customer contacts the agent and wants to sell his entire position. The customer is most subject to which of the following?

• A. Credit risk.
• B. Liquidity risk.
• C. Execution risk.
• D. Conversion risk.

Correct Answer: B

Explanation:

B: The investor has a large position in a thinly traded stock; as a result, the investor is subject to a large amount of liquidity risk.