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:

Self-awareness

The ability of an individual to recognize their own emotions, thoughts, and values, and understand how they influence behavior.

Human Suffering

The experience of physical pain, emotional distress, or psychological turmoil, often related to hardship or tragedy.

Psychological Conflicts

Internal struggles that arise from opposing demands, desires, or impulses within an individual, often highlighted in psychoanalytic theories.

Thrown-ness

In Heidegger’s existential analysis, the era, location, and situation into which a person happens to be born.