g Select one: a. If a firm's stockholders are well diversified, we know from theory and from studies of market behavior that corporate risk is not important. b. Undiversified stockholders, including the owners of small businesses, are more concerned about corporate risk than market risk. c. Empirical studies of the determinants of required rates of return (r) have found that only market risk affects stock prices. d. Market risk is important but does not have a direct effect on stock price because it only affects beta.

Undiversified stockholder is an individual whose portfolio contains only a few securities or classes of securities. He carries a great deal of risk as he invests exclusively in an particular sector.

Corporate risk refers to when internal and external factors such as modification in products and services or a change in financial position that could negatively affect the corporate stock price.

Undiversified stockholders including the owners of small businesses, are more concerned about corporate risk than market risk.