Legal, Regulatory Risk

Select an option above to see an explanation here.

A) Market risk is a systematic risk, not a legal and regulatory risk. B) A government policy change affecting a specific industry is an example of legal and regulatory risk. C) A natural disaster damaging a company's production facilities is an example of company-specific risk, not legal and regulatory risk. D) A borrower defaulting on a loan is an example of credit risk, not legal or regulatory.

Select an option above to see an explanation here.

A) Investing only in government bonds does not mitigate legal and regulatory risk, as it does not diversify the portfolio across different industries. B) Diversifying investments across different industries can help mitigate legal and regulatory risks, reducing the impact of risks specific to a single industry or company. C) Investing only in companies with a strong credit rating does not mitigate legal and regulatory risk, as it does not diversify the portfolio across different industries. D) Investing only in companies with a low debt-to-equity ratio does not mitigate legal and regulatory risk, as it does not diversify the portfolio across different industries.

Select an option above to see an explanation here.

A) Legal and regulatory risk can be mitigated through diversification, as it is a type of unsystematic risk. B) Company-specific risk can be mitigated through diversification, as it is a type of unsystematic risk. C) Industry-specific risk can be mitigated through diversification, as it is a type of unsystematic risk. D) Diversification cannot mitigate systematic risk, as it affects the entire market or economy.