Which one of the following is the best example of a diversifiable risk?
A)interest rates increase
B)energy costs increase
C)core inflation increases
D)a firm's sales decrease
E)taxes decrease

Question

Quizplus · Accepted Answer

A firm's sales decreasing is an example of a diversifiable risk because it is specific to a particular company and industry. Other companies or industries may not be affected in the same way, making it possible to reduce the risk through diversification by investing in other companies or industries. On the other hand, interest rates, energy costs, core inflation, and taxes are examples of systematic risks that affect the overall market and cannot be diversified away.

Which One of the Following Is the Best Example of a Diversifiable