Which One of the Following Is an Example of a Nondiversifiable

question 123

Multiple Choice

Which one of the following is an example of a nondiversifiable risk?

• A) a well-respected president of a firm suddenly resigns
• B) a well-respected chairman of the Federal Reserve suddenly resigns
• C) a key employee suddenly resigns and accepts employment with a key competitor
• D) a well-managed firm reduces its work force and automates several jobs
• E) a poorly managed firm suddenly goes out of business due to lack of sales

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Definitions:

Merchants

Individuals or businesses engaged in the selling of goods, services, or commodities for profit.

Reasonably Fit

A standard in commercial transactions that signifies goods provided under a contract must be of average or suitable quality for the purposes for which such goods are normally used.

Implied Warranty

A legal term for guarantees that are not expressly stated but are assumed in the sale of goods or services, ensuring basic standards of quality and functionality.

Merchantability

A legal concept referring to the implicit guarantee that a product is fit for the purposes for which it is sold.