The Capital Assest Pricing Model Accounting Assignment

The Capital Assets Pricing Model
Trident University
Module 3 Case
ECO202: Macroeconomics
For each of the scenarios below, explain whether or not it represents a diversifiable or an undiversifiable risk. Please consider the issues from the viewpoint of investors. Explain your reasoning.
There's a substantial unexpected increase in inflation.
The diversifiable (unsystematic risk depends on the events that are unique to an asset, group of assets or a particular firm. Undiversifiable (systematic) risk represents the risk associated with economic factors that affect all the firms. The total risk is the sum of systematic and unsystematic risk. When there is a substantial and unexpected increase in inflation, this is undiversifiable risk as all firms are affected, and this increase costs for buyers.
There's a major recession in the U.S.
Recession is an undiversifiable risk since it affects all firms and investments and even diversification cannot eliminate the risk. In recession, there is higher than usual unemployment rates, in a contracted economy, and many firms scale down their operations, indicating that all investments are affected
A major lawsuit is filed against one large publicly traded corporation.
A major lawsuit is a form of a diversifiable risk, since it affects the publicly traded corporation rather than all firms. It is also a random and uncontrollable event, and the risk can be reduced significantly through diversifi...