Explain why the risk premium of a stock does not depend on its diversifiable risk.       Question content area bottom Part 1 ​(Select the best choice​ below.)     A. Investors​ don't care about diversifiable risk and so​ don't hold any.   B. Investors care about diversifiable​ risk, but hedge their positions so they​ don't demand a risk premium.   C. Although investors must hold diversifiable​ risk, they​ don't care about​ it, so there is no risk premium.   D. Investors can remove diversifiable risk from their portfolio by diversifying. They therefore do not demand a risk premium for it.

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 9MC
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Explain why the risk premium of a stock does not depend on its diversifiable risk.
 
 
 

Question content area bottom

Part 1
​(Select the best choice​ below.)
 
 
A.
Investors​ don't care about diversifiable risk and so​ don't hold any.
 
B.
Investors care about diversifiable​ risk, but hedge their positions so they​ don't demand a risk premium.
 
C.
Although investors must hold diversifiable​ risk, they​ don't care about​ it, so there is no risk premium.
 
D.
Investors can remove diversifiable risk from their portfolio by diversifying. They therefore do not demand a risk premium for it.
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