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:

Sales Returns

Sales returns refer to the process of refunding a customer for the return of goods, which results in a reduction of revenues on the seller's financial statements.

Sales Discounts

Reductions from the listed price given by a seller to a buyer as an incentive to purchase.

Expense Accounts

These accounts are used to track the money spent or costs incurred in a company's operations.

Sales Discount

A reduction in the price charged to customers, typically given in exchange for prompt payment.