Which of the following is an example of nondiversifiable risk? (a) Risk resulting from a general decline in the stock market (b) Risk resulting from a news release that management has committed fraud (c) Risk resulting from an explosion in a grain elevator owned by Continental (d) Risk resulting from an impending lawsuit against the company

A non-diversified risk is an investment asset or a bond a real estate stocks that can be reduced or eliminated by addition of an asset that diversifies the investments.

It can be also referred to as a market or a systematic risk and can be understood as an investment risk that are unavoidable lie natural disasters, wars or epidemics.

Some factors responsible of this are changes in the foreign investment policy and alteration of taxes, social-economic measured and global security threats.

bihariyadeep28 bihariyadeep28 · Answer 2 · 2022-01-22T12:02:39+01:00

Non- diversifiable risk is defined as a risk that cannot be eliminated by having larger portfolio. It can also be referred as market or systematic risk. It is beyond the control of the entity and cannot be mitigated.

Hence Risk resulting from a general decline in the stock market is an example of non-diversifiable risk.

Characteristics of non-diversifiable risk:

This risk is common to whole class of asset or liabilities.
They influence whole market.
They are beyond the control of the entity and the management.
They are result of economic changes that cannot be ratified through increasing portfolio.

Therefore the example of non-diversifiable risk is risk resulting from a general decline in the stock market .

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