Which one of the following is an example of unsystematic risk? Multiple Choice An across the board increase in income taxes Adoption of a national sales tax Decrease in the national level of inflation An increased feeling of global prosperity National decrease in consumer spending on entertainment

National decrease in consumer spending on entertainment

Explanation:

A portfolio depicts various investments made in securities of different companies, offering varied risks and returns, constructed with the motive of total risk reduction and earning optimum returns.

Risk can be classified into systematic and unsystematic risk.

Systematic risk refers to the risk to which whole of stock market is exposed to. It represents market related risk. For example, change in the political scenario of a country or change in state of economy such as boom or recession would be classified as systematic risk. This risk is uncontrollable by a business.

Unsystematic risk on the other hand represents a company or industry specific risk. For example rise in the price of grapes would affect the alcohol industry. This risk can be reduced via diversification.

In the given case, national decrease in consumer spending on entertainment would adversely affect whole of entertainment industry specifically and thus it represents an example of unsystematic risk.

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