Which of the Following Statements Is FALSE

question 9

Multiple Choice

Which of the following statements is FALSE?

• A)Because investors are risk averse,they will demand a risk premium to hold unsystematic risk.
• B)Over any given period,the risk of holding a stock is that the dividends plus the final stock price will be higher or lower than expected,which makes the realized return risky.
• C)The risk premium for diversifiable risk is zero,so investors are not compensated for holding firm-specific risk.
• D)Because investors can eliminate firm-specific risk "for free" by diversifying their portfolios,they will not require a reward or risk premium for holding it.

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Definitions:

Dividends

Payments made by a corporation to its shareholder members. It can be issued in various forms, such as cash payment, stocks, or other forms.

Tax Deductible

Expenses that can be subtracted from gross income to reduce the taxable income, potentially lowering overall tax liability.

Net After-Tax Income

The amount of income that remains for a business or individual after all taxes have been deducted from total revenues.

Total Assets

The sum of all assets owned by a company, including both current and non-current assets, indicating the total resources at its disposal.