Match the column

" Match List –I with List –II.

Codes
Choose the correct answer from the options given below:

Correct option is D

1. (A) Financial Risk → (III) Financial Capacity
· Financial risk refers to the uncertainty related to the financial stability or capacity of a business or individual. It concerns the ability to meet financial obligations, which is directly tied to the financial capacity of the entity.
2. (B) Market Risk → (I) Investor Psychology
· Market risk is influenced by investor psychology, which includes factors like sentiment, herd behavior, and reactions to market news. Investor behavior can lead to volatility in markets, impacting the prices of securities.
3. (C) Purchasing Power Risk → (IV) Price Level
· Purchasing power risk relates to changes in the price level, particularly inflation, which erodes the real value of money. As prices rise, the purchasing power of money decreases, affecting investments with fixed returns.
4. (D) Political and Social Risk → (II) Capital Market
· Political and social risk impacts the capital market due to instability caused by government policies, elections, social unrest, or geopolitical events. Such risks can affect investor confidence and market performance, leading to fluctuations in returns.
Information Booster:
Different types of risks impact investments based on various external and internal factors. Understanding the nature of these risks is crucial for investors to make informed decisions and manage uncertainty effectively.
· Financial Risk: Relates to an entity's ability to manage debt and financial obligations.
· Market Risk: Arises from broader market movements, often influenced by investor psychology.
· Purchasing Power Risk: Tied to inflation, it affects the value of future returns by reducing the real purchasing power of money.
· Political and Social Risk: Involves uncertainty due to political changes or social factors that may impact the business environment and financial markets.