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

---

Definitions:

Repression

In psychoanalytic theory, the basic defense mechanism that banishes from consciousness anxiety-arousing thoughts, feelings, and memories.

Memory Construction

The process whereby the brain forms, stores, and reconstructs information and experiences into memories.

Past Experiences

Pertains to events or activities that an individual has gone through in their life, which can influence current behavior and decisions.

Vivid

Describes memories or images that are strikingly clear and detailed, often so as to appear real or lifelike.