Question

you are considering investing in general motors (GM). which of the following is an example of diversifable risk? a. risk resulting from economic uncertainly b. risk resulting from an increase in inflation rate c. risk resulting from an increase intrest rates d. risk resulting from an expected automovile industry shock g

Answer 1

Answer:

d. risk resulting from an expected automobile industry shock g

Explanation:

Non systemic risk are risks that can be diversified away. they are also called company specific risk or industry specific risk . Examples of this type of risk is a manager engaging in fraudulent activities and risk resulting from an expected automobile industry shock

Systemic risk are risk that are inherent in the economy. They cannot be diversified away. They are also known as market risk. examples of this risk include recession, inflation, and high interest rates. Investors should seek compensation for systemic risk. Systemic risk is measured by beta. The higher beta is, the higher the systemic risk and the higher the compensation demanded for by investors