You are considering investing in Ford Motor Company.Which of the following are examples of diversifiable risk?
I.Risk resulting from possibility of a stock market crash.
II.Risk resulting from uncertainty regarding a possible strike against Ford.
III.Risk resulting from an expensive recall of a Ford product.
IV.Risk resulting from interest rates decreasing.
A) I only
B) I and IV
C) I, II, III, IV
D) II, III

Question

Quizplus · Accepted Answer

Risks that are specific to a particular company, industry, or sector are diversifiable risks. Options II and III both represent risks specific to Ford Motor Company, making them examples of diversifiable risk. Option I represents a market risk, which affects all companies and industries, making it a non-diversifiable risk. Option IV represents a macroeconomic risk, which also affects all companies and industries, making it a non-diversifiable risk. Therefore, the only diversifiable risks in the options given are II and III, making choice D the best answer.

You Are Considering Investing in Ford Motor Company