Diversification That Reduces Unsystematic Risk Is Likely to Be Associated

Multiple Choice

Diversification that reduces unsystematic risk is likely to be associated with less variance of a firm's cash flows.This is likely to benefit:

A) Shareholders,because they are sensitive to all forms of risk
B) Bondholders,because greater variability of cash flows increases a firm's vulnerability to default on payments to bondholders
C) Both groups
D) Neither group