Asked by Monisa Siddiqi on Jun 27, 2024
Verified
Which statement best characterizes economic events such as inflation,recession,and high interest rates?
A) They are systematic risk factors that can be diversified away.
B) They are company-specific risk factors that can be diversified away.
C) They are among the factors that are responsible for market risk.
D) They are risks that are beyond the control of investors and thus should not be considered by security analysts or portfolio managers.
Economic Events
Economic events are occurrences with economic impact that affect an entity's financial position and performance, including transactions and market fluctuations.
Systematic Risk Factors
Factors that affect the overall financial market and cannot be mitigated through diversification. These include interest rates, inflation, and economic recessions.
Market Risk
The likelihood that investors might face losses because of issues impacting the general functioning of the financial markets.
- Examine how financial contractions influence portfolios that are diversified versus those that are not.
Verified Answer
Learning Objectives
- Examine how financial contractions influence portfolios that are diversified versus those that are not.
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