Which One of the Following Is an Example of Diversifiable

question 152

Multiple Choice

Which one of the following is an example of diversifiable risk?

• A) The price of electricity just increased.
• B) The employees of Textile, Inc. just voted to go on strike.
• C) The government just imposed new safety standards for all employees.
• D) The government just lowered corporate income tax rates.
• E) The Workers Compensation Premiums just increased nationwide.

---

Definitions:

Capital Rationing

The process of selecting profitable projects to invest in, limited by the availability of funds.

NPV

Net Present Value, a financial metric used to evaluate the profitability of an investment, considering the time value of money.

Mutually Exclusive

Events or decisions that cannot occur or be taken simultaneously; selecting one option precludes the choice of the other.

Profitability Index

A financial metric used to evaluate the desirability of an investment or project, calculated as the present value of future cash flows divided by the initial investment cost.