multiple choice An example of an unsafe funding risk would b

multiple choice

An example of an unsafe funding risk would be: An overnight line of funding used to fund a high yield bond An issuance of a 2 year bond funding an asset expected to be held for 3 months only An issuance of a 2 year bond funding an asset expected to be held for 2 years Sale of a low volatile stock to raise money to buy a high volatility stock

Solution

Answer: 4^th option

A stock carries higher risk than a bond, because earning of the former completely depends on market sentiment – a share price may be high today but may fall tomorrow drastically; a bond on the other hand is much safer investment, since it has repayment option or conversion option.

If such stock has low volatility, it means it has low risk and low return; but if such stock becomes high volatile, it would be riskier as its return becomes high.

The whole stock market is unsafe because it is not backed by any repayment option.