question archive Which of the following statements is correct? Group of answer choices Well-diversified stockholders do not consider a firm's corporate risk when establishing their required rates of return
Which of the following statements is correct? Group of answer choices Well-diversified stockholders do not consider a firm's corporate risk when establishing their required rates of return
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Which of the following statements is correct?
Group of answer choices
Well-diversified stockholders do not consider a firm's corporate risk when establishing their required rates of return.
Empirical studies to determine the factors that affect required rates of return (r) have concluded that only market risk affects stock prices; i.e., neither corporate risk nor stand-alone risk has any impact on required rates of return.
A firm's market risk is not an important factor in determining its required rate of return.
Undiversified stockholders, including the owners of small businesses, probably are more concerned about the corporate risk associated with a particular firm than are diversified stockholders.
A firm's market risk is important, but it does not directly affect stock prices because it only affects the firm's beta.
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The correct statement is;
Undiversified stockholders, including the owners of small businesses, probably are more concerned about the corporate risk associated with a particular firm than are diversified stockholders.
Step-by-step explanation
The main reason for the answer above is that;
An undiversified stockholder will usually have one or two stocks in his portfolio and will be concerned about that particular company's risk only than a diversified stockholder who will be concerned about multiple risks.
