Why Do Stock Market Investors Appear Not to Be Concerned

question 95

Multiple Choice

Why do stock market investors appear not to be concerned with unique risks when calculating expected rates of return?

• A)there is no method to quantify unique risks.
• B)unique risks are assumed to be diversified away.
• C)unique risks are compensated by the risk-free rate.
• D)Beta includes a component to compensate unique risk.

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Definitions:

Completeness

The quality or state of being complete or whole, with no missing parts.

Witnesses

Individuals who have seen an event, typically an accident or crime, and can provide a firsthand account of what happened.

Wrongful Dismissal

The termination of an employee's contract of employment in violation of the contract or without sufficient legal reason.

Employment Contract

A legal agreement between an employer and an employee, outlining the terms and conditions of employment.