Which one of the following is an example of a nondiversifiable risk? Select one: a. a...

Which one of the following is an example of a nondiversifiable risk?

Select one:

a. a well-managed firm reduces its work force and automates several jobs

b. a well-respected president of a firm suddenly resigns

c. a key employee suddenly resigns and accepts employment with a key competitor

d. a well-respected chairman of the Federal Reserve suddenly resigns

e. a poorly managed firm suddenly goes out of business due to lack of sales

Expert Solution

Correct answer is option (d)

Reason:Non diversifiable risk or systematic risk or market risk is the risk which is due to market factors and which cannot be controlled by a particular firm and which affets whole industry and not only a particular firm.All the options in above question are factors which affect that particular firm but resignation of chairman of federal reserve which is central bank of united states will affect whole industry and therefore the risk due to this factor is non diversifiable risk.

jeff jeffy answered 2 years ago

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