A company's stock price jumped when it announced that its revenue had decreased because of the quality issues of its products. This is an example of ________.
A)market risk
B)unsystematic risk
C)systematic risk
D)undiversifiable risk

Question

Quizplus · Accepted Answer

This is an example of unsystematic risk, which is also known as company-specific risk. It pertains to risks that are inherent in a particular company, such as management issues or operational problems. In this case, the decrease in revenue was caused by the quality issues of the company's products, which are specific to that company rather than affecting the entire market or industry. The stock price increased because the market perceived the company as having addressed its quality issues, which could lead to better financial performance in the future. This is an example of how good news for a company can sometimes result in a stock price increase even if it is caused by company-specific issues.

A Company's Stock Price Jumped When It Announced That Its