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:

Gains

The increase in wealth or resources, often measured as the difference between the sale price and the purchase price of an asset.

Behavioral Economists

Scholars who study the impact of psychological, social, cognitive, and emotional factors on the economic decisions of individuals and institutions.

Weight on the Future

This key-term may refer to the emphasis or consideration given to future outcomes or consequences in decision-making processes.

Canalization

A concept in genetics and developmental biology referring to the ability of an organism to produce the same phenotype regardless of variability in its environment or genotype.