Which of these risks would most likely be a diversifiable risk for investors? A. The US...

Which of these risks would most likely be a diversifiable risk for investors?

A. The US dollar strengthens, making exports more expensive for non-US customers

B. Congress passes legislation that raises the corporate tax rate.

C. A hurricane damages factories near the Gulf Coast.

D. The Federal Reserve increases the interest rate.

Solutions

Expert Solution

Option (A) is correct

The US dollar strengthens, making exports more expensive for non-US customers will be a diversifiable risk as we can diversify or eliminate this risk by shifting from non -US customers to US customers.

Options (B), (C) and (D) are incorrect as Legislation enactments, hurricane damages and increase in interest rates are non diversifiable risks and cannot be eliminated or diversified.

jeff jeffy answered 1 year ago

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