Question 7 3 pts Larson Lumber is a manufacturer of various wood products used i

Question

Question 7 3 pts Larson Lumber is a manufacturer of various wood products used in the construction of residential housing. The profits of Larson's business are highly influenced by the overall performance of the economy and how it impacts individuals' willingness and ability to build a new house. What type of risk is this and do investors care about this risk? O Systematic risk; No, investors do not care about this risk 0 Firm-specific risk; No, investors do not care about this risk O Systematic risk; Yes, investors care about this risk Firm-specific risk; Yes, investors care about this risk

Explanation / Answer

there are 2 types of risks. Unsystematic and systematic.

unsystematic = firm specific and affects the firm

systematic risk = affects all the firms whatever type of business they are doing

Here, As the discussed case is a firm-specific case, it is called firm-specific risk.

and yes, investors do care about this risk.

when investors see that a particular sector is witnessing recession, they will sell off and switch to other sectors, where growth is there

so answer is : last one : Firm-specific risk; yes, investors care about this risk

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.