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April 2011, Q20 (iii)

AKS01

Very Active Member
Hi,

The examiners report to this question says
"A director will probably have only one principal employer and will, therefore, be motivated more by total risk".

I understand that a director cannot diversify their portfolio like a shareholder can and are therefore exposed to the specific risks of the project more. But I am unsure what this sentence means.
 
Hi

I'm not sure there's much more to understand! :)

I think you've explained the examines report quote pretty well in your next sentence, ie because a director probably has only one principal employer (ie cannot diversify like a shareholder) they take into account total risk (ie both systematic and specific).
 
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