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19 November, 16:51

Which one of the following is an example of a nondiversifiable risk?

a. a well-respected chairman of the Federal Reserve Bank suddenly resigns

b. a well-respected president of a firm suddenly resigns

c. a poorly managed firm suddenly goes out of business due to lack of sales

d. a key employee suddenly resigns and accepts employment with a key competitor

e. a well-managed firm reduces its work force and automates several jobs

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  1. 19 November, 18:08
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    A well-respected chairman of the Federal Reserve Bank suddenly resigns

    Explanation:

    A non-diversifiable or systematic risk, is a risk which is common to a whole market or class of investments and not just limited to just a particular company or investment.

    Non-systematic risk is a risk common to just an investment or a company.

    If the chairman of the Federal Reserve Bank suddenly resigns, it would affect a wide range of investments in the market and not just a company, which is an example of a non-diversifiable risk.
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