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Can someone help with this 1) a. We routinely assume that individuals and, particularly individual investors,...

Can someone help with this

1) a. We routinely assume that individuals and, particularly individual investors, are risk-averse return seekers. If that is the case, why do we also contend that only systematic and not total risk is important to them? b. Why should a financial decision maker such as a corporate treasure or CFO be concerned with market efficiency?

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1a) The individuals are concerned with systematic risk and not total risk because systematic risk cannot be diversified. The total risk consists of both systematic and unsystematic risk, of which unsystematic risk can be diversified. Hence, it is not taken into consideration by the individuals and also not considered important.

B) CFO or corporate treasure is concerned with market efficiency because if the market is efficient then all the information will be reflected in the price of the stock, and it will become difficult to beat the market. This will also cause them to take more of active risk. If the market is inefficient, then they can technical and fundamental analysis ti beat the market.

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