Question

which one of the following is an example of systematic risk? A. the price of lumber declines sharply B. AA pilots go on strike C. the Federal Reserve increases interest rates D. a hurricane hits a tourist destination in Tampa E. people in SF become diet conscious and avoid fast food store

Answer 1

Answer:

The answer is C.

Explanation:

Systematic risk is the risk the risk that affects the whole market or Industry. An individual firm needs to adjust to it. This type of risk is also known as undiversified risk. It is caused by macroeconomic factors.

Federal reserves increasing interest rates affects the whole economy and not just a segment.

All the other options relate to segments and they can be diversified.

Answer 2

Answer:

The correct answer is letter "C": the Federal Reserve increases interest rates.

Explanation:

Systematic risk is the risk that everybody faces when they invest in a market. It's the total, aggregate risk that comes from events like natural disasters, wars wide government policy reforms, and other incidents that cannot be anticipated or prevented.

Thus, governmental actions such as increasing interest rates through the Federal Reserve (Fed) to control inflation levels can be considered as systematic risks.