Certified Financial Management Specialist Practice Exam

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Prepare for the Certified Financial Management Specialist Exam with multiple choice questions and detailed explanations. Enhance your skills and ensure success on your exam!

Practice this question and more.

What is price risk primarily associated with?

Loss from price fluctuations of assets
Maintaining liquidity in financial markets
Reducing operational costs
Compliance with market regulations

The correct answer is: Loss from price fluctuations of assets

Price risk is primarily associated with the potential loss that can occur due to fluctuations in the prices of assets. This risk arises because financial markets are influenced by a variety of factors including economic changes, market sentiment, and geopolitical events, leading to variability in asset prices. When prices decrease, investors can incur significant losses, and this is particularly relevant in the context of trading securities, commodities, and real estate. The other options do not align with the definition of price risk. Maintaining liquidity pertains to the ability to buy or sell assets quickly without affecting their price. Reducing operational costs is focused on efficiency within a business rather than market fluctuations. Compliance with market regulations involves adhering to laws and guidelines rather than issues related to asset pricing. Therefore, the correct answer is grounded in understanding how market dynamics can affect the value of investments.