Which of the following best describes unsystematic risk?

Unsystematic risk refers specifically to the type of risk that is unique to a particular company or industry rather than the overall market or economy. It encompasses factors like management decisions, competitive position, and specific events that can impact a company's stock performance.

When describing unsystematic risk, it is important to understand that it can be mitigated through diversification. By holding a portfolio with a variety of stocks across different sectors, an investor can reduce the impact that any one company's poor performance may have on their overall investment.

The other options point towards different categories of risk. For example, a risk that affects the entire economy refers to systematic risk, which encompasses factors like inflation, interest rates, and recession scenarios that impact all investments broadly. Similarly, risks concerned specifically with interest rate changes or inherent unpredictability align with broader systematic or general risk frameworks rather than with the focused, company-specific nature of unsystematic risk. Therefore, the best description is the one that accurately reflects the localized impact of an event on a specific stock or sector.