Why Should Stock Market Investors Ignore Specific Risks When Calculating

question 57

Multiple Choice

Why should stock market investors ignore specific risks when calculating required rates of return?

• A) There is no method for quantifying specific risks.
• B) Specific can be diversified away.
• C) Specific risks are compensated by the risk-free rate.
• D) Beta includes a component to compensate for specific risk.

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Definitions:

Recruit

The process of attracting, selecting, and appointing suitable candidates to fill vacant positions within an organization.

Replacement

The process of substituting a new or alternative for an existing employee, part, or component within an organization or system.

Social Skills

The abilities used to communicate and interact with others effectively.

Influence Others

The ability to affect the actions, decisions, and thinking of others through persuasion, leadership, or other interpersonal means.