Which of the following are examples of diversifiable risk?
i.An earthquake damages Oakland,California.II.The federal government imposes an additional $1,000 fee on all business entities.III.Employment taxes increase nationally.IV.Toymakers are required to improve their safety standards.
A) I and III only
B) II and IV only
C) II and III only
D) I and IV only
E) I,III,and IV only

Question

Quizplus · Accepted Answer

Diversifiable risk is the risk that can be eliminated by diversifying investments. Examples of diversifiable risk are risks that are specific to a company or industry and can be reduced by investing in a variety of companies and industries. Option I is an example of non-diversifiable risk as it affects only the Oakland region and cannot be diversified away. Options II and III are not diversifiable risks as they affect all businesses or employees nationally. Option IV is a diversifiable risk as it affects only the toymakers and can be reduced by diversifying investments into other industries. Thus, the correct answer is D.

Which of the Following Are Examples of Diversifiable Risk