The Type of the Risk That Can Be Eliminated by Diversification

question 17

Multiple Choice

The type of the risk that can be eliminated by diversification is called

• A)market risk.
• B)unique risk.
• C)interest rate risk.
• D)default risk.

---

Definitions:

Contribution Margin

The amount remaining from sales revenue after variable costs have been deducted, used to cover fixed costs and to generate profit.

Production Capacity

The maximum output that an organization can produce with the available resources in a given period.

Operating Loss

The amount by which the operating expenses of a business exceed its gross profits.

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, or insurance.