169k views
0 votes
Which of the following is NOT a systematic risk?

A) the risk that oil prices rise, increasing production costs
B) the risk that the economy slows, reducing demand for your firmʹs products
C) the risk that your new product will not receive regulatory approval
D) the risk that the Federal Reserve raises interest rates

User Jacole
by
5.1k points

1 Answer

6 votes

Answer:

C. the risk that your new product will not receive regulatory approval

Step-by-step explanation:

First, let me try to clarify the difference between systematic and unsystematic risk.

Systematic risk is one that is inherent or prevalent and affects the entire market. A risk that is embedded in the economic system. Once changes occur in factors that are woven into the fabric of an economy, it affects the entire economy, there is no way to avoid or predict their outcome or effect. They are risks that cannot be mitigated through diversification.

Unsystematic risks on the other hand are those that affect or are influenced by specific factors in an industry. They can be referred to industry specific risks.

From the question, the only industry specific risk is that of the new product not receiving regulatory approval which can be mitigated by ensuring that the new product meets the required benchmark, and thus, mitigated or prevented.

However, the other risks such as oil price rises, economic slow down, and rising interest rates are systemic risks.

Please feel free to ask more questions.

User Bernhard Josephus
by
5.9k points