If you are a diversified investor in Facebook, which of the following types of risk would...

If you are a diversified investor in Facebook, which of the following types of risk would you include in your discount rate?

A. The risk that Mark Zuckerberg will stay on as CEO
B. The risk that new privacy laws will restrict data gathering and access
C. The risk that users will find a different social media platform to spend their time on.
D. The risk that a global economic slowdown will affect how much companies spend on advertising
E. The risk that Mark Zuckerberg will leave as CEO

Expert Solution

If I am diversified investor, I need not worry about systematic risks (risks that will impact all stocks or all stocks of a industry).

Risks in options B, C & D are systematic risk.

I only need to include unsystematic risk (risk specific to stock).

Only unsystematic risk above is option E.

Therefore option E is correct.

jeff jeffy answered 2 years ago

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