Figure 27-4
-Which of the following is a source of market risk?
A)Holding stocks in many companies carries the risk of a reduced average return.
B)Real GDP varies over time and sales and profits move with real GDP.
C)When a paper producer has declining sales, it is likely that so will other paper producers.
D)If stockholders become aggravated with the way a CEO runs a company, the price of that company's stock might fall in the stock market.

Question

Figure 27-4 
-Which of the following is a source of market risk?
A)Holding stocks in many companies carries the risk of a reduced average return. 
B)Real GDP varies over time and sales and profits move with real GDP. 
C)When a paper producer has declining sales, it is likely that so will other paper producers. 
D)If stockholders become aggravated with the way a CEO runs a company, the price of that company's stock might fall in the stock market.

Quizplus · Accepted Answer

Market risk, also known as systematic risk, affects the entire market and cannot be eliminated through diversification. Real GDP variations impact overall economic activity, influencing sales and profits across the board, which aligns with the definition of market risk.

Figure 27-4 -Which of the Following Is a Source of Market Risk