Which one of the following is an example of a nondiversifiable risk?

a. a well-respected chairman of the Federal Reserve Bank suddenly resigns

b. a well-respected president of a firm suddenly resigns

c. a poorly managed firm suddenly goes out of business due to lack of sales

d. a key employee suddenly resigns and accepts employment with a key competitor

e. a well-managed firm reduces its work force and automates several jobs

Question

Business

Jasper Pierce

12 February, 06:38

Which one of the following is an example of a nondiversifiable risk?

a. a well-respected chairman of the Federal Reserve Bank suddenly resigns

b. a well-respected president of a firm suddenly resigns

c. a poorly managed firm suddenly goes out of business due to lack of sales

d. a key employee suddenly resigns and accepts employment with a key competitor

e. a well-managed firm reduces its work force and automates several jobs

+3

Answers (1)

Know the Answer?

Christopher Meadows · Answer 1

A well-respected chairman of the Federal Reserve Bank suddenly resigns

Explanation:

A non-diversifiable or systematic risk, is a risk which is common to a whole market or class of investments and not just limited to just a particular company or investment.

Non-systematic risk is a risk common to just an investment or a company.

If the chairman of the Federal Reserve Bank suddenly resigns, it would affect a wide range of investments in the market and not just a company, which is an example of a non-diversifiable risk.