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    Question

    An insurance company invests a large portion of its

    funds into corporate bonds rated BBB. After a sudden downgrade to junk status, the insurer faces loss of portfolio value. What type of risk is this?
    A Operational Risk Correct Answer Incorrect Answer
    B Credit Risk Correct Answer Incorrect Answer
    C Liquidity Risk Correct Answer Incorrect Answer
    D Reputational Risk Correct Answer Incorrect Answer
    E Strategic Risk Correct Answer Incorrect Answer

    Solution

    Downgrading of bond rating indicates credit/default risk.

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