Final answer:
Krista faces legislative risk due to new tax laws and fiscal policies affecting her investment in a foreign company's stock, which could lead to financial losses if the changes impact the company's operations or investor confidence.
Step-by-step explanation:
The type of risk that Krista faces as an investor due to the introduction of new tax laws and fiscal policies in the country where the foreign company is based is legislative risk. Legislative risk is associated with changes in laws and regulations that can affect the investment climate and potentially lead to financial losses for investors. The new policies could impact the company's profitability, tax liabilities, or operations, which in turn can affect the stock's value. This is particularly important when investments are not going into long-term physical capital but rather short-term government bonds, as foreign investors could quickly withdraw their capital if they perceive a risk, such as a potential decline in the country's exchange rate or concerns about the government's ability to repay its debts. This panic can lead to a massive exodus of short-term financial capital, which can have a profound impact on the value of an investment in a company operating within such an unstable regulatory environment.