CFA Level I · CFA Level I Exam · Introduction to Geopolitics
During a sudden rise in geopolitical tension, investors most likely shift funds toward:
Investors most likely move into high-quality government bonds of stable issuers. Rising tension prompts a flight to quality toward liquid, low-risk assets, while thinly traded frontier equities and unhedged emerging market corporate debt are riskier and typically see outflows.
- Athinly traded frontier market equities
- Bhigh-quality government bonds of stable issuersCorrect
- Cunhedged emerging market corporate debt
Explanation
In a flight to quality, investors move to assets seen as safe and liquid, such as high-quality sovereign bonds of stable issuers. Frontier equities and unhedged emerging market debt carry more risk and less liquidity.
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