Question

Which of the following provides the best example of a systematic-risk event? A. A strike by union workers hurts a firm's quarterly earnings. B. Mad Cow disease in Montana hurts local ranchers and buyers of beef. C. The Federal Reserve increases interest rates 50 basis points. D. A senior executive at a firm embezzles $10 million and escapes to South America.

Answer 1

Answer:

C.

Explanation:

From the various options listed, the one that would be considered a systematic-risk event would be if the Federal Reserve increases interest rates 50 basis points. This is mainly because this event would cause various entire markets to be affected, as increasing the reserve interest rates causes the value of the country's currency to devalue and become more expensive to make purchases as well as obtain loans. Therefore affecting a wide range of entire markets throughout the country.