Which of the following is an example of unsystematic risk?

Unsystematic risk refers to the risk inherent to a specific company or industry, as opposed to the overall market, which is categorized as systematic risk. Business risk, in particular, relates to the operational challenges and uncertainties faced by an individual company, such as changes in management, competition, or regulatory environments. This type of risk can be mitigated through diversification of investments, as it is not correlated with the performance of the broader market.

In contrast, the other types of risk mentioned, like interest rate risk, market risk, and liquidity risk, influence the market or a broader segment of securities. Interest rate risk affects all fixed-income assets and is related to changes in interest rates. Market risk involves the risk of losses due to overall market movements affecting a broad range of securities simultaneously. Liquidity risk, on the other hand, arises from the inability to quickly buy or sell assets without causing a substantial impact on their price, again a broader concern compared to the confines of a specific company or industry.

Thus, business risk stands out as the quintessential example of unsystematic risk, emphasizing the unique challenges faced by individual firms rather than the movements of the market as a whole.