Which financial instrument typically has a high settlement risk? A. Foreign exchange transactions B. Corporate bonds C. Mutual funds D. Exchange-traded funds (ETFs)
Question
Which financial instrument typically has a high settlement risk? A. Foreign exchange transactions B. Corporate bonds C. Mutual funds D. Exchange-traded funds (ETFs)
Solution
A. Foreign exchange transactions typically have a high settlement risk. This is because they involve multiple parties across different time zones, which can lead to delays in settlement. Additionally, changes in exchange rates during the settlement period can also increase the risk.
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