D076 Module 6 pre-test 100%

A company that produces soap, shampoo, lotion, and other personal care products has recently taken a hit due to a competitor's new product line. The company decides to reduce wages for its labor force to save money while the company focuses on building up its reputation again, but the company's labor force goes on strike to protest the pay cuts. What type of risk does the strike represent? - Idiosyncratic risk Different types of risks - interest rate risk default risk price risk Diversification only decreases risk up to a certain point - at which there is market risk that cannot be diversified away. expected return - expectations data to calculate a hypothesized estimate of future prices or returns firm-specific risk - Unsystmatic risk Diversifiable risk Idiosyncratic risk Holding Period Return - the return over the entire period that an investor owns a financial security How is risk separation different from diversification? - Risk separation involves dispersing assets geographically instead of concentrating them in one location.