In the universe of investment, risks are usually classified into two types; one is systematic risk and the other unsystematic one. However, a prominent theory says that in the efficient market, investors are only rewarded for systematic risk, because unsystematic risk can be eliminated by                                        . 

 

What is the best word for the blank?

 

Answer: [  ]

 

  a. mutual fund

  b. derivatives

  c. diversification

  d. Treasury Bonds

 

8. SolBridge corporation's total value is now $40million and is tax-exempt. And assume any debt proceeds are used to repurchase equity.

If the company sells $18.4 million in debt, the firm value will

  a. increase

  b. decrease

  c. be the same

  d. be unpredictable