Which type of risk involves potential losses due to market performance factors?

The identification of price risk as the type of risk involving potential losses due to market performance factors is accurate and reflects a clear understanding of financial risks. Price risk specifically pertains to the fluctuations in the market prices of investments. When market conditions shift, whether due to economic changes, investor sentiment, or other performance-related factors, the value of assets can increase or decrease. This volatility can lead to potential losses for investors if they decide to sell their holdings at a lower price than their purchase price.

Price risk is especially relevant in leveraged investments where even slight changes in asset prices can lead to significant gains or losses. Understanding price risk is essential for investors in UITFs, as the value of the units can be directly affected by changes in the prices of the underlying assets.

In contrast, other options such as time risk generally refers to the possibility of not achieving expected returns due to the holding period being extended, liquidity risk relates to the inability to sell an investment quickly without a significant loss in value, and investment risk encompasses a broader range of risks including both price risk and other risks associated with an investment's performance. Therefore, the recognition of price risk as a specific factor tied directly to market performance is crucial for managing investment portfolios effectively.