Because Investors Can Eliminate Unsystematic Risk "For Free" by Diversifying

question 94

Multiple Choice

Because investors can eliminate unsystematic risk "for free" by diversifying their portfolios, they ________.

• A) do not require a risk premium for bearing it
• B) require a risk premium for bearing it
• C) are indifferent about credit spread and risk premium
• D) do not require a credit spread

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Definitions:

Retention

The phenomenon where the configuration of a molecule remains unchanged during or after a chemical process.

Substitution

A chemical reaction in which an atom or group of atoms is replaced with a different atom or group of atoms in a molecule.

Specific Rotation

A measure of the degree to which a compound can rotate plane-polarized light, typically expressed in degrees and dependent on concentration, temperature, and wavelength.

Racemization

A process leading to the conversion of an optically active compound into a racemic mixture, where there is an equal proportion of left and right-handed enantiomers.