Final answer:
Market risk is the risk that a stock is susceptible to poor performance due to weak stock market conditions. It is influenced by factors such as economic conditions and investor sentiment. Option B
Step-by-step explanation:
Market risk is the risk that a stock is susceptible to poor performance due to weak stock market conditions. It refers to the possibility that the overall stock market will decline and negatively affect the value of individual stocks.
This type of risk is beyond the control of the company or management, and is influenced by factors such as economic conditions, investor sentiment, and market trends.
For example, during the stock market crash of 1929, the market risk was a significant factor. The crash was caused by a combination of factors, including speculative buying, over-inflated stock prices, and excessive borrowing to invest in the market. When the market declined, many investors suffered losses and stocks performed poorly.
A decline in interest rates can be caused by a rise in supply of money in the financial market. When the supply of money increases, it tends to lower interest rates as there is more money available for lending.
This can be beneficial for borrowers as it reduces the cost of borrowing, but it may also indicate weak economic conditions that can impact stock performance and increase market risk. Option B