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

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Definitions:

Corpus Albicans

The corpus albicans is the regressed, fibrous remains of the corpus luteum in the ovary, following the absence of pregnancy.

Progesterone

A steroid hormone involved in the menstrual cycle, pregnancy, and embryogenesis of humans and other species.

Spermicidal Agents

Substances used to kill sperm, often used as a form of contraception.

Perimenopause

The transition phase before menopause, marked by irregular menstrual cycles and changes in hormone levels, leading up to the end of reproductive years.