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Why Investors Demand Higher Expected Rates of Return

Explain why investors demand higher expected rates of return on stocks with more variable rates of return.

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Explain why investors demand higher expected rates of return on stocks with more variable rates of return.

The capital asset pricing model measures the investors required rate of return given the degree of market risk. Market risk is a risk that can't be avoided no matter how much an investor diversifies. (Brealey, Myers & Allen, 2011) Market risk is derived from the market conditions or economic issues that affect the industry as a whole. Investors who seek high market risk investments demand a higher rate of return on ...

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The solution gives 334 words and 2 references to answer this corporate finance question on why investors require a higher rate of return.

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