Acme Gold Mining, Inc. discovers a huge vein of gold in the mountains of Iowa. This is an example of
A)the high returns that can be expected from investing in companies that mine minerals.
B)idiosyncratic risk.
C)market risk.
D)systematic risk.

Question

Quizplus · Accepted Answer

This scenario represents idiosyncratic risk, which is the risk associated with a specific company or asset. Acme Gold Mining, Inc. has the potential to experience significant financial gains, but also carries a high level of risk if the gold vein proves to be less profitable than expected, if there are environmental concerns, or if there are challenges with production, for example. This risk is specific to Acme Gold Mining, Inc. and not necessarily reflective of the broader market.