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.

Question

Quizplus · Accepted Answer

This is an example of unsystematic risk, which is company-specific and can be eliminated through diversification. The fact that the stock price dropped due to the actions of the chairman shows that it is not a systematic risk factor, which affects the entire market. The risk was also anticipated since it was discovered after the fact, ruling out option E. Option A (systematic) and D (market) both refer to risks that affect the entire market, so they are not the best choices in this case.

The Stock Price of a Gold-Mining ﬁRm Drops When It