Question

Against your better judgment, you lend $100 to your cousin Manny, who has a reputation for failing to pay back loans. What kind of risk are you taking? A. a liquidity risk B. a time risk C. an inflation rate risk D. a credit risk

Answer 1

The correct answer is D. Credit Risk

Answer 2

D. a credit risk

Step-by-step explanation:

It can be found in "Principles for the Management of Credit Risk – final document" that credit risk is defined as "the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms". In other words, is the risk of lending money and not receiving it back.