Why Would a Stock Market Investor Not Be Concerned with Unique

question 24

Multiple Choice

Why would a stock market investor not 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.

---

Definitions:

Abyssal Plains

Very flat, deep-sea floors found at depths between 3,000 and 6,000 meters, making up a large portion of the ocean's basin.

Oceanic Fracture Zones

Linear oceanographic features caused by the movement of tectonic plates, characterized by significant variations in depth and topography.

Seafloor

The bottom of an ocean or sea, composed of various geological features including ridges, valleys, plains, and trenches, shaped by processes like volcanic activity, sediment deposition, and tectonic movements.

Mid-Ocean Ridges

Oceanic mountain chains that develop due to the movements of tectonic plates, leading to the formation of new sea floor as a result of volcanic eruptions.