Question

Which of the following is NOT a systematic risk? (Multiple choice)

A. The risk that the inflation is falling below zero

B. The risk that the Federal Reserve lowers interest rate

C. The risk that FDA rejects a potential drug by a major pharmaceutical company for treating cancer

D. The risk that the economy slows down

E. The risk that a global pandemic severely impacts the health of humans

Answer 1

Solution:

Systematic risk is the risk that cannot be diversified and it is inherent in the market. These are the systematic risks- Interest rate risk, Purchasing power risk, political risk, exchange rate risk, etc.

A ) The risk that inflation is falling below zero

This is a type of systematic risk as it lowers the purchasing power

B.) The risk that the Federal Reserve lowers the interest rate

This is a type of systematic risk as it is interest rate risk

C.) The risk that the FDA rejects a potential drug by a major pharmaceutical company for treating cancer

This is not a systematic risk as this is related to a particular company

D. The risk that the economy slows down

This is a systematic risk as this will affect the whole market

E. The risk that a global pandemic severely impacts the health of humans

This is a systematic risk as this will affect the whole market

The correct option is C )