Asked by Harry Singh on Jun 24, 2024
Verified
Which one of the following is an example of diversifiable risk?
A) A decrease in the average cost of living.
B) An increase in the prime interest rate.
C) An increase in the minimum hourly wage.
D) A new government regulation on aircraft engines.
E) A decrease in federal income taxes on business incomes.
Diversifiable Risk
A risk that can be reduced or mitigated through the diversification of investments in a portfolio.
Government Regulation
Laws and rules established by governmental agencies aimed at controlling the way businesses can operate within the economy.
- Differentiate unsystematic (diversifiable) from systematic (non-diversifiable) risks.
Verified Answer
KR
Kavia RameshJun 28, 2024
Final Answer :
D
Explanation :
Diversifiable risk refers to the risk that affects a specific company or industry rather than the entire market or economy. A new government regulation on aircraft engines is an example of a risk that can impact specific companies (those in the aircraft or related industries) rather than the whole market, making it a diversifiable risk.
Learning Objectives
- Differentiate unsystematic (diversifiable) from systematic (non-diversifiable) risks.