Asked by
Linda Whitaker
on Dec 20, 2024
Verified
Which of the following statements is most correct?
A) Business-specific risk cannot be eliminated by diversification.
B) Investors are not compensated for bearing business specific risk.
C) Risk that cannot be diversified away is the risk peculiar to the stock under consideration.
D) You cannot ignore the business-specific risk even if you hold a very large portfolio.
E) All of the above statements are correct.
Business-Specific Risk
The risk associated with the particular circumstances of a specific company, which can affect its earnings and thus its stock price.
Diversification
An investment strategy aimed at reducing risk by allocating investments among various financial assets, sectors, or industries.
- Comprehend the importance of diversification in lessening unsystematic risk.
- Discern the contrast between diversifiable and non-diversifiable risks.
Verified Answer
KC
Learning Objectives
- Comprehend the importance of diversification in lessening unsystematic risk.
- Discern the contrast between diversifiable and non-diversifiable risks.