Explain Why Returns on Assets Compensate for Systematic Risk but Not

question 54

Essay

Explain why returns on assets compensate for systematic risk but not for idiosyncratic risk.

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Definitions:

Legal Limits

The boundaries established by law, beyond which actions are deemed illegal or unauthorized.

Thoreau

Henry David Thoreau, an American essayist, poet, and philosopher known for his writings on natural history and philosophy, including "Walden."

Declare Laws

The act of formally stating or enacting legal rules and regulations by a governing body or authority.

Unconstitutional

Something that contradicts or violates the principles and rules set forth in a country's constitution.