Which one of the following is an example of systematic risk?
A) Investors panic causing security prices around the globe to fall precipitously
B) A flood washes away a firm's warehouse
C) A city imposes an additional one percent sales tax on all products
D) A toymaker has to recall its top-selling toy
E) Corn prices increase due to increased demand for alternative fuels

Question

Quizplus · Accepted Answer

Systematic risk, also known as market risk, is the risk inherent to the entire market or an entire market segment. The scenario described in option A is an example of systematic risk because it is a market-wide event that impacts security prices around the world. The other options are examples of unsystematic risk, which is risk associated with a specific company or industry.

Which One of the Following Is an Example of Systematic