Credit risk and interest rate risk cannot affect insolvency risk.

Question

Quizplus · Accepted Answer

Credit risk and interest rate risk can both contribute to a company's financial distress and increase its likelihood of insolvency. For example, if a company has significant debt with variable interest rates, an increase in interest rates could lead to higher debt payments and strain on the company's finances. Similarly, if a company's creditworthiness deteriorates, it may find it difficult to obtain financing or refinance existing debt, further increasing its financial risk.

Credit Risk and Interest Rate Risk Cannot Affect Insolvency Risk