Chapter 10, Problem 26P

a)

Summary Introduction

To discuss: The type of risk involved when a main production plant has shut down due to a tornado.

Introduction:

Risk refers to the movement or fluctuation in the value of an investment. The movement can be positive or negative. A positive fluctuation in the price benefits the investor. The investor will lose money if the price movement in negative.

b)

Summary Introduction

To discuss: The type of risk involved when there is a decrease in the demand of product of the firm.

Introduction:

Systematic risk refers to the market-specific risk that affects all the stocks in the market.

c)

Summary Introduction

To discuss: The type of risk involved when the best employees are hired away.

Introduction:

Unsystematic risk refers to the company-specific risk that affects only the individual company.

d)

Summary Introduction

To discuss: The type of risk involved when there is a new product.

Introduction:

Unsystematic risk refers to the company-specific risk that affects only the individual company.