Final answer:
Event risk refers to unforeseen events specifically affecting an entity's financial stability or operations, such as a corporate takeover. It's distinct from systemic risks like inflation, instead relating to more isolated incidents that can have a severe effect on individual companies or sectors.
Step-by-step explanation:
An example of event risk would be B) A corporate takeover. Event risk refers to the uncertainty and potential financial loss that companies and investors face due to unforeseen events. These events are often beyond the control of the individual or company and can include natural disasters, political instability, and, in the context of the financial market, actions like corporate takeovers. Unlike systemic risks such as inflation or a broad rise in unemployment, which affect the entire market or economy, event risks are more specific to a particular company or sector.
Examples of event risks that investors may face include:
- A corporate takeover, can disrupt operations and lead to changes in the management or strategic direction of a company.
- A sudden change in government policy that affects a specific industry.
- Natural disasters that impact the supply chain or production facilities of a company.
In contrast, capital growth (E) is not an event risk but refers to the increase in value of an asset or investment over time.