Which one of the following is an example of systematic risk?
A)A poorly managed company suddenly goes out of business due to slow sales.
B)An efficient company reduces its work force and automates several jobs.
C)A key company employee suddenly resigns and accepts employment with a competitor.
D)A well respected chairman of the Federal Reserve suddenly resigns.
E)An unpopular president of a firm suddenly resigns.

Question

Quizplus · Accepted Answer

The sudden resignation of a well-respected chairman of the Federal Reserve can cause turmoil and uncertainty in the financial markets, affecting a broad range of industries and investments. This is an example of systematic risk, which is market-wide or economy-wide risk that cannot be avoided by diversification. The other choices describe events that may affect only one company or industry, and therefore, are examples of unsystematic or idiosyncratic risk.

Which One of the Following Is an Example of Systematic