The correct answer is B. Inverse.
Liquidity is the ease with which an asset can be converted into cash without affecting its price. Risk is the possibility of loss or harm.
The relationship between liquidity and risk is inverse. This means that the more liquid an asset is, the lower its risk. Conversely, the less liquid an asset is, the higher its risk.
This is because a liquid asset can be easily sold for cash, even in a down market. This means that the investor is less likely to lose money on the asset. Conversely, an illiquid asset cannot be easily sold for cash. This means that the investor is more likely to lose money on the asset if they need to sell it quickly.
For example, a stock is a liquid asset. It can be easily sold on a stock exchange. This means that the risk of loss on a stock is relatively low. Conversely, a real estate property is an illiquid asset. It cannot be easily sold, especially in a down market. This means that the risk of loss on a real estate property is relatively high.
In conclusion, the relationship between liquidity and risk is inverse. The more liquid an asset is, the lower its risk. Conversely, the less liquid an asset is, the higher its risk.