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.

Question

Quizplus · Accepted Answer

Investors are not compensated for bearing business-specific risk because it can be eliminated through diversification. Only systematic risk, which affects the entire market, is compensated.

Which of the Following Statements Is Most Correct