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:

Efficient

Pertaining to a process or system that achieves maximum productivity with minimal wasted effort or expense.

Economy

Represents the system of production, distribution, and consumption of goods and services within a specific region or country.

Efficiency

Efficiency in economics means the optimal allocation of scarce resources to meet the desired objectives, minimizing waste and maximizing value.

Economy

A broad term that encompasses all activities related to the production, consumption, and trade of goods and services in an area or country.