Which of the following statements is correct? O Undiversified stockholders, incl

Question

Which of the following statements is correct? O Undiversified stockholders, including the owners of small businesses, are more concerned about corporate risk than market risk Empirical studies of the determinants of required rates of return (k) have found that only market risk affects stock prices OMarket risk is important but does not have a direct effect on stock price because it only affects beta Market risk does not play any role in determining the rate of return on an investment O If a firm's stockholders are well diversified, we know from theory and from studies of market behavior that corporate risk is not important.

Explanation / Answer

last is the right option

others are wrong because

1) undervisified owners are concerned abt market risk more

2) expectations of investors is also a factor

3)beta affects stock price by changing required equity return

4)market risk plays a role in determining required ROI

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