Why Do Stock Market Investors Appear Not to Be Concerned

question 101

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:

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Major administrative units of the federal government of the United States responsible for enforcing and administering federal laws and policies.

Inspiring Patriotism

The act or practices aimed at fostering a deep love, loyalty, and devotion to one's country, often through education, symbols, and national narratives.

John Trumbull

An American artist during the period of the American Revolutionary War known for his historical paintings of the Revolution, including depictions of the Declaration of Independence.