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Investors are not rewarded for firm specific risk because that risk can be:

ADeferred later
BDiscounted twice
CDeclared safe
DDiversified away
Answer & Solution
Correct answer: D. Diversified away
1. Anyone can remove it at no cost by spreading holdings. 2. The market pays nothing for avoidable risk. 3. So it can be diversified away. _Source: OpenStax Principles of Finance, Chapter 15, Risk and Return._
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