Question
In: Finance
(27) The logical outcome of portfolio investment theory is that the expected rate of return for...
(27) The logical outcome of portfolio investment theory is that the expected rate of return for a stock ( will / will not ) contain a persistent risk premium for company specific factors:
(a) it will, as investors must be compensated for bearing investment risk regardless of its source
(b) it will not, as equilibrium expected returns should reflect only non-diversifiable stock market risk
Solutions
Expert Solution
Answer (a) :- it will, as investors must be compensated for bearing investment risk regardless of its source
The Logical outcome of portfolio investment theory is that the expected rate of return for a stock is that it will contain a persistent risk premium for company specific factors as investors must be compensated for bearing investment risk regardless of its source.
As with the help of portfolio investment the risk is diversified as the amount is not invested in risky and risk free securities both.
Share holders are getting high return as they are get compensated for taking risk
jeff jeffy answered 2 years agoRelated Solutions
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