The Major Difference Between Firm-Specific Credit Risk and Systematic Credit

question 64

Multiple Choice

The major difference between firm-specific credit risk and systematic credit risk is that:

• A)FIs can diversify systematic credit risk, while firm-specific credit risk cannot be diversified.
• B)FIs can diversify firm-specific credit risk, while systematic credit risk cannot be diversified.
• C)None of the listed options are correct, as FIs can diversify both types of credit risk.
• D)None of the listed options are correct, as FIs cannot diversify either type of credit risk.

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Definitions:

Activity Variance

The difference between budgeted and actual activity levels, often analyzed in cost accounting and performance management.

Cleaning Equipment

Assets such as vacuums, mops, and detergents used in maintaining tidiness and hygiene standards at a workplace or production facility.

Cost Formula

An equation or calculation that determines the total cost of producing goods or services, often including factors like labor, materials, and overhead.

Flexible Budget

A financial plan that changes in accordance with alterations in activity volume or intensity.