Indicate whether the following events might cause stocks in general to change price, and whether they might cause Big Widget Corp.'s stock to change price:

a. The government announces that inflation unexpectedly jumped by 2 percent last month.

b. Big Widget's quarterly earnings report, just issued, generally fell in line with analysts' expectations.

c. The government reports that economic growth last year was at 3 percent, which generally agreed with most economists' forecasts.

d. The directors of Big Widget die in a plane crash.

e. Congress approves changes to the tax code that will increase the top marginal corporate tax rate. The legislation had been debated for the previous six months.

Question

Business

Essence Wu

8 July, 02:47

Indicate whether the following events might cause stocks in general to change price, and whether they might cause Big Widget Corp.'s stock to change price:

a. The government announces that inflation unexpectedly jumped by 2 percent last month.

b. Big Widget's quarterly earnings report, just issued, generally fell in line with analysts' expectations.

c. The government reports that economic growth last year was at 3 percent, which generally agreed with most economists' forecasts.

d. The directors of Big Widget die in a plane crash.

e. Congress approves changes to the tax code that will increase the top marginal corporate tax rate. The legislation had been debated for the previous six months.

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Answers (1)

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Everett · Answer 1

Check the explanation below

Explanation:

Inflation is systematic (Market) risk, it impacts all stocks

Results of company is unsystematic (Specific) risk, as they are as expected stock price wont have much impact

Economic growth is systematic (Market) risk, as it is inline with forecasts stock prices will be constant

Directors death is unsystematic (Specific) risk, stock price will go down

Taxation is systematic (Market) risk, as it is discussed from 6 month, stock price wont have much impact currently