Which of the following are examples of diversifiable risk?
I.An earthquake damages Oakland,California.
II.The federal government imposes an additional $1,000 fee on all business entities.
III.Employment taxes increase nationally.
IV.Toymakers are required to improve their safety standards.
A) I and III only
B) II and IV only
C) II and III only
D) I and IV only
E) I, III, and IV only
F) None of the above.

Question

Quizplus · Accepted Answer

I is an example of an undiversifiable risk because it is a natural disaster that affects all businesses and individuals in Oakland, CA. 
II is an example of an undiversifiable risk because it affects all business entities. 
III is an example of a diversifiable risk because it only affects businesses in a specific country, and investors could mitigate this risk by diversifying across different countries. 
IV is an example of a diversifiable risk because it only affects toymakers, and investors could mitigate this risk by diversifying across different industries.

Which of the Following Are Examples of Diversifiable Risk