Asked by Paolina Gonzalez on Apr 25, 2024
Verified
The stock price of a gold-mining firm drops when it is discovered the firm's chairman has overstated minable gold reserves. This is an example of a (n) ______________ risk factor.
A) Systematic.
B) Non-diversifiable.
C) Unsystematic.
D) Market.
E) Anticipated.
Unsystematic Risk
The type of risk that is unique to a specific company or industry, unpredictable and can be mitigated through diversification.
Minable Gold Reserves
The quantity of gold that is economically viable to extract from the earth's crust.
Risk Factor
An element or variable that increases the likelihood of a negative outcome, such as financial loss or failure.
- Measure the implications of different risk factors (systematic and unsystematic) on securities and portfolios.
Verified Answer
MH
Marianas Hustlee6 days ago
Final Answer :
C
Explanation :
This is an example of unsystematic risk, which refers to the risk associated with a specific company or industry. In this case, the risk is specific to the gold-mining firm due to the actions of its chairman, and it can be mitigated through diversification.
Learning Objectives
- Measure the implications of different risk factors (systematic and unsystematic) on securities and portfolios.