Investors dislike risk and therefore demand compensation for being exposed to it. This compensation takes the form
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Investors dislike risk and therefore demand compensation for being exposed to it. This compensation takes the form of higher average expected rates of return. The riskier the asset, the greater is the average expected rate of return. Because a well-diversified portfolio has no diversifiable risk, investors will need to be compensated only for the asset’s level of nondiversifiable risk as measured by beta.
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Economics Principles Problems And Policies
ISBN: 9780073511443
19th Edition
Authors: Campbell Mcconnell ,Stanley Brue ,Sean Flynn
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