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A key insight in risk and return models in finance is that some risks are diversifiable and others are not. This is followed by

A key insight in risk and return models in finance is that some risks are diversifiable and others are not. This is followed by the assumption that the marginal investor in the company is diversified. Assume that you know the proportion of stock held by different groups, how much trading they account for, and how much of the investor's portfolio is made of this particular company. Determine which group is most likely to contain the marginal investor? Investor Group A. Founder/Insiders B. Government C. Domestic mutual funds 20% D. Individual investors E. Foreign mutual funds % of stock held 15% 15% 20% 30% % of overall trading 15% 15% 20% 25% 25% % of Investors Portfolio 80% 5% 5% 70% 10%

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