Which of the Following Conditions Can Cause a Compensating Differential

question 2

Multiple Choice

Which of the following conditions can cause a compensating differential?

• A) a strong union
• B) publicly visible salaries
• C) a long term pay equity plan
• D) a poor industry reputation

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Definitions:

Non-diversifiable Risk

The portion of an investment's risk that cannot be eliminated through diversification, related to factors affecting the entire market.

Unsystematic Risk

A type of risk that affects a small number of assets, often referred to as "specific risk," and is related to issues like management performance or consumer preferences.

Marketplace

A venue for buying and selling goods, services, or financial instruments, which can be physical or virtual.

Systematic Risk

The risk inherent to the entire market or market segment, also known as market risk or un-diversifiable risk, which cannot be mitigated through portfolio diversification.