Final answer:
Operational Risk is the type of risk related to internal business problems in an ADI, not Market Risk, Credit Risk, or Liquidity Risk. Investors must balance return, risk, and liquidity.
Step-by-step explanation:
The risk that problems arise in other internal business channels, potentially compromising the financial and operational position of an Authorized Deposit-taking Institution (ADI), is referred to as Operational Risk. This is different from Market Risk, which is the risk of losses in positions arising from movements in market prices; Credit Risk, the risk of loss due to a borrower's inability to repay a loan or meet contractual obligations; and Liquidity Risk, the risk that an entity will not be able to meet its short-term debt obligations.
When analyzing the risk involved in different types of financial assets, it is important for investors in the financial market to consider factors like the average expected return, the degree of risk, and liquidity. Banks, as financial intermediaries, balance these factors by offering various account types and purchasing insurance, like that from the FDIC, to mitigate the risk of bank failure.
Answer: Option 3: Operational Risk