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International Finance Market

What would happen in the market if an investor were compensated for diversifiable risk in addition to market risk?

Why might accounting income not equal new cash flow?

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What would happen in the market if an investor were compensated for diversifiable risk in addition to market risk?
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Looking at a scenario in which investors could be compensated for both diversifiable and markets risks would create great confidence within the market. It would basically lead to a bull market in which investors would invest erratically and haphazardly with no fear of loss. This same bull market would lead to a direct effect within the economy. This would occur because erratic investing can only be afforded and a luxury to those who have ...

Solution Summary

What would happen in the market if an investor were compensated for diversifiable risks in addition to market risks is determined. Why accounting income might not equal new cash flows is determined.

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