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:

Adolescence

A developmental phase following childhood, marked by physical, psychological, and social changes leading to adult maturity.

Exhibitionist

A person who behaves in ways intended to attract attention or display themselves.

Victim

An individual who suffers harm, injury, or loss as a result of a crime, accident, or other event or action.

Ignoring

Intentionally paying no attention or showing indifference to someone or something.