Diversification That Reduces Unsystematic Risk Is Likely to Be Associated

question 12

Multiple Choice

Diversification that reduces unsystematic risk is likely to be associated with less variance of a firm's cash flows.This is likely to benefit:

• A)Shareholders,because they are sensitive to all forms of risk
• B)Bondholders,because greater variability of cash flows increases a firm's vulnerability to default on payments to bondholders
• C)Both groups
• D)Neither group

---

Definitions:

Young People

Individuals in their late childhood to early adulthood, often considered to encompass teenagers and those in their early 20s.

Careers

Long-term occupations or professions, often involving specialized training or education, and followed as one's lifework.

Hurricanes

Powerful tropical storms characterized by strong winds and heavy rain, usually forming over warm ocean waters.

Gasoline

A volatile, flammable liquid derived from petroleum, used primarily as fuel in internal combustion engines.