Question
A firm faces many risks. Which of the following are examples of unsystematic risks faced by a firm?
Multiple select question.
A hostile takeover attempt by a competitor
The death of the CEO
An increase in the dividend tax rate
A change in the Federal Reserve's monetary policy
Multiple select question.
A hostile takeover attempt by a competitor
The death of the CEO
An increase in the dividend tax rate
A change in the Federal Reserve's monetary policy
Answers
GPT-4o mini
Unsystematic risk refers to risks that are specific to a particular company or industry, as opposed to systematic risks, which affect the entire market or a large segment of the economy. In the options provided, the following are examples of unsystematic risks faced by a firm:
1. **A hostile takeover attempt by a competitor** - This risk is specific to the firm facing the takeover and depends on the actions of its competitors and internal management decisions.
2. **The death of the CEO** - This is an unsystematic risk because it specifically affects the firm in question and can impact its strategic direction and operations.
The other options are examples of systematic risks:
- **An increase in the dividend tax rate** - This affects all firms paying dividends and is influenced by government policy.
- **A change in the Federal Reserve's monetary policy** - This impacts the overall economy and financial markets, affecting all firms in a broader context.
Thus, the correct answers for unsystematic risks are **A hostile takeover attempt by a competitor** and **The death of the CEO**.
1. **A hostile takeover attempt by a competitor** - This risk is specific to the firm facing the takeover and depends on the actions of its competitors and internal management decisions.
2. **The death of the CEO** - This is an unsystematic risk because it specifically affects the firm in question and can impact its strategic direction and operations.
The other options are examples of systematic risks:
- **An increase in the dividend tax rate** - This affects all firms paying dividends and is influenced by government policy.
- **A change in the Federal Reserve's monetary policy** - This impacts the overall economy and financial markets, affecting all firms in a broader context.
Thus, the correct answers for unsystematic risks are **A hostile takeover attempt by a competitor** and **The death of the CEO**.