Question: I ask you to think about CAPM and explain the following. We routinely assume that investors are risk-averse return-seekers. That is, they like returns and

I ask you to think about CAPM and explain the following. We routinely assume that investors are risk-averse return-seekers. That is, they like returns and dislike risk. If so, why does CAPM say that only systematic risk is priced and earns a return, whereas nonsystematic risk is not priced? In other words, why do we contend that only systematic risk and not total risk is important?

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