Which of the Following Statements Is Correct

question 31

Multiple Choice

Which of the following statements is correct?

• A) If a firm's stockholders are well diversified,we know from theory and from studies of market behavior that corporate risk is not important.
• B) Undiversified stockholders,including the owners of small businesses,are more concerned about corporate risk than market risk.
• C) Empirical studies of the determinants of required rates of return (r)have found that only market risk affects stock prices.
• D) Market risk is important but does not have a direct effect on stock price because it only affects beta.

---

Definitions:

Medicare

A federal health insurance program in the United States primarily for people who are 65 or older, as well as for some younger people with disabilities.

Employer's Payroll Taxes Expenses

These are taxes paid by the employer based on the wage and salary amounts paid to employees, including social security, Medicare taxes, and unemployment taxes.

FICA Tax

Taxes required by the Federal Insurance Contributions Act, funding Social Security and Medicare benefits.

FUTA Tax

The Federal Unemployment Tax Act tax, which employers pay to help fund state workforce agencies.