Why Do Stock Market Investors Seem to Ignore Unique Risks

question 33

Multiple Choice

Why do stock market investors seem to ignore unique risks when calculating expected rates of return?

• A) There is no method for quantifying 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 for unique risk.

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Definitions:

Secondary Amine

A type of amine where the nitrogen atom is attached to two organic substituents and one hydrogen.

Primary Amine

Organic compounds containing nitrogen, characterized by a nitrogen atom attached to one alkyl or aryl group.

Butylethylamine

A compound consisting of butyl and ethyl groups attached to an amine functional group.

Butylpropylamine

Butylpropylamine is an organic compound characterized by its structure comprising both butyl and propyl amine groups, and it's used in various chemical syntheses and applications.