Which one of the following is an example of a nondiversifiable risk?
A) A well-respected president of a firm suddenly resigns.
B) A well-respected governor of the Bank of Canada suddenly resigns.
C) A key employee of a firm suddenly resigns and accepts employment with a key competitor.
D) A well-managed firm reduces its work force and automates several jobs.
E) A poorly managed firm suddenly goes out of business due to lack of sales.

Question

Quizplus · Accepted Answer

Nondiversifiable risk, also known as systematic or market risk, affects the entire market or economy, not just a specific company or industry. The sudden resignation of a well-respected governor of the Bank of Canada could impact the entire financial system or economy, making it a nondiversifiable risk.

Which One of the Following Is an Example of a Nondiversifiable