Which of the following statements is false? Because investors are risk averse, t
ID: 2769853 • Letter: W
Question
Which of the following statements is false?
Because investors are risk averse, they will demand a risk premium to hold diversifiable risk.
The risk premium for diversifiable risk is zero, so investors are not compensated for holding firm-specific risk.
Over any given period, the risk of holding a stock is that the dividends plus the final stock price will be higher or lower than expected, which makes the realized return risky.
Because investors can eliminate firm-specific risk "for free" by diversifying their portfolios, they will not require a reward or risk premium for holding it.
Because investors are risk averse, they will demand a risk premium to hold diversifiable risk.
The risk premium for diversifiable risk is zero, so investors are not compensated for holding firm-specific risk.
Over any given period, the risk of holding a stock is that the dividends plus the final stock price will be higher or lower than expected, which makes the realized return risky.
Because investors can eliminate firm-specific risk "for free" by diversifying their portfolios, they will not require a reward or risk premium for holding it.
Explanation / Answer
Because investors are risk averse, they will demand a risk premium to hold diversifiable risk.False
The risk premium for diversifiable risk is zero, so investors are not compensated for holding firm-specific risk.True
Over any given period, the risk of holding a stock is that the dividends plus the final stock price will be higher or lower than expected, which makes the realized return risky.True
Because investors can eliminate firm-specific risk "for free" by diversifying their portfolios, they will not require a reward or risk premium for holding it.True
Because investors are risk averse, they will demand a risk premium to hold diversifiable risk.False
The risk premium for diversifiable risk is zero, so investors are not compensated for holding firm-specific risk.True
Over any given period, the risk of holding a stock is that the dividends plus the final stock price will be higher or lower than expected, which makes the realized return risky.True
Because investors can eliminate firm-specific risk "for free" by diversifying their portfolios, they will not require a reward or risk premium for holding it.True
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.