Which of the Following Statements Is Correct

Multiple Choice

Which of the following statements is correct?

A) Well-diversified stockholders do not consider a firm's corporate risk when establishing their required rates of return.
B) Undiversified stockholders, including the owners of small businesses, probably are more concerned about the corporate risk associated with a particular firm than are diversified stockholders.
C) Empirical studies to determine the factors that affect required rates of return (r) have concluded that only market risk affects stock prices; i.e., neither corporate risk nor stand-alone risk has any impact on required rates of return.
D) A firm's market risk is important, but it does not directly affect stock prices because it only affects the firm's beta.
E) A firm's market risk is not an important factor in determining its required rate of return.