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 that affects the entire market or a particular industry, and cannot be eliminated through diversification. Investor panic and a subsequent fall in security prices affect the market as a whole, making it an example of systematic risk. The other options are examples of unsystematic risks, which can be reduced through portfolio diversification.

Which One of the Following Is an Example of Systematic