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.

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Definitions:

Business Model

A strategic plan outlining how a company creates, delivers, and captures value in economic, social, cultural, or other contexts.

Market Success

The achievement of desired sales, profit margins, and market share goals within a targeted market or industry.

Dummy Corporation

An entity created to serve as a front or to conceal the true nature of a business transaction, often for legal or financial reasons, without engaging in any real business activities.

Financial Losses

The negative impact on an entity's finances, typically resulting from poor investment decisions, business failures, or unforeseen expenses.