Which one of the following is an example of systematic risk?
A) The Federal Reserve unexpectedly announces an increase in target interest rates.
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.
F) None of the above.

Question

Quizplus · Accepted Answer

The unexpected increase in target interest rates by the Federal Reserve is an example of systematic risk. This is because it affects the entire economy and all firms and individuals who rely on borrowing and lending. It cannot be diversified away by investing in a specific company or industry.

Which One of the Following Is an Example of Systematic