Question

Problem 6 Which firm characteristic bellow would be evidence of high systematic risk? A) Concentration in...

Problem 6

Which firm characteristic bellow would be evidence of high systematic risk?

A) Concentration in products with high consumer discretionary, like luxury products

B) Low fixed costs relatively to variable costs

C) Low debt relatively to the market value of equity

D) High volatility (standard deviation) of the stock’s returns

E) Concentration in products with low consumer discretionary, like non-durable goods

Homework Answers

Answer #1

consumer discretionary goods are those goods which are only purchased by the consumer is the consumer is having excess disposable income and these products are not regularly needed for day to day life of the customers so these products will be having very hard systematic risk because there will be highly subjected to any change in the macro condition.Luxury products will also be having high systematic risk

All the other options are false

Correct answer will be option (A) concentration in product with high consumer discretionary like luxury products.

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