The correct answer is: B. portfolio risk
Portfolio risk is the risk that remains in a portfolio after diversification has been applied. It is the risk that cannot be eliminated by combining assets in a portfolio. Portfolio risk is caused by factors that affect all assets in the portfolio, such as changes in interest rates, inflation, and economic conditions.
Stock risk is the risk associated with owning a particular stock. It is the risk that the price of the stock will go down, resulting in a loss for the investor. Stock risk is caused by factors that affect the specific company, such as its financial performance, management, and industry.
Diversifiable risk is the risk that can be eliminated by combining assets in a portfolio. It is the risk that is specific to a particular asset or group of assets. Diversifiable risk can be eliminated by investing in a portfolio of assets that are not correlated with each other.
Market risk is the risk that is common to all assets in the market. It is the risk that the market will go down, resulting in losses for all investors. Market risk is caused by factors that affect the entire market, such as changes in interest rates, inflation, and economic conditions.
Here are some examples of events that can cause portfolio risk:
- Strikes: A strike can cause a company to lose production, which can lead to a decrease in profits and a decrease in the price of the company’s stock.
- Unsuccessful marketing programs: An unsuccessful marketing program can lead to a decrease in sales, which can lead to a decrease in profits and a decrease in the price of the company’s stock.
- Lawsuits: A lawsuit can be very expensive, and if the company loses the lawsuit, it could have to pay a large amount of money, which could lead to a decrease in profits and a decrease in the price of the company’s stock.