Systematic versus Unsystematic Risk. Indicate whether the following events might

Question

Systematic versus Unsystematic Risk. Indicate whether the following events might cause stocks in general to change price, and whether they might cause Bid Widget Corp.' stock to change price:

a. The government announces that inflation unexpectedly jumped by 2 percent last month

b. Big Widget's quarterly earnings report, just issued, generally fell in line with analysts' expectations.

c. The government reports that economic growth last year was at 3 percent, which generally agreed with most economists' forecasts.

d. The directors of Bid WIdget die in a plane crash.

e. Congress approves changes to the tax code that will increase the top marginal corporate tax rate. The legislation had been debated for the previous six months.

Explanation / Answer

Below are the reasons :

a. possible change in systematic risk and market prices tends to decline.
b. possibly no change in unsystematic risk and company price tends to stay constant.

c. possibly no change in systematic risk and market prices tends to stay constant.

d. possible change in unsystematic risk and company price tends to decline.

e. possibly no change in systematic risk and market prices tends to stay constant.

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