Which of the Following Statements Is False

question 82

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:

Benefit

an advantage or profit gained from something, or the act of improving or advancing in a particular aspect.

Requirement

A specified necessity; conditions or capabilities needed by a user to solve a problem or achieve an objective.

Negative Connotations

Implications or associations of a word or phrase that evoke negative feelings or perceptions.

Fail

to fall short of success in achieving a goal or meeting a standard, often leading to negative consequences or the need for reevaluation.