Which of the following statements about the various kinds of risks and their associated market reward is true??
A. ?Liquidity risk is a market risk, hence not rewarded by the market.
B. ?Default risk is a firm-specific risk, hence rewarded by the market.
C. ?Exchange rate risk is a diversifiable risk, hence not rewarded by the market.
D. ?Inflation risk is an unsystematic risk, hence not rewarded by the market.
E. ?Interest rate risk is a systematic risk, hence rewarded by the market.
Answer: E
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