Diversification that reduces company specific ("unsystematic")risk is beneficial to the company's bondholders since it reduces the risk of default.

Question

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By reducing company specific risk through diversification, the company becomes less vulnerable to the negative impact of a single event or a series of events that could lead to default. This provides greater security for bondholders as it reduces the likelihood of default, thus making it beneficial for them.

Diversification That Reduces Company Specific ("Unsystematic")risk Is Beneficial to the Company's