____ Is the Appropriate Measure for Stand-Alone Risk and ____

question 40

Multiple Choice

____ is the appropriate measure for stand-alone risk and ____ is the appropriate measure of risk when adding an asset to a diversified portfolio.

• A) beta;variance
• B) beta;standard deviation
• C) standard deviation;beta
• D) standard deviation;variance

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Definitions:

Business Risk

The potential for a company to experience losses or fail to achieve its financial goals due to economic conditions, operational issues, or other unforeseen factors.

Economic Profit

The total revenue a firm earns minus both its explicit and implicit costs, representing surplus value created from production.

Economic Loss

A monetary loss that occurs when the cost of producing a good or service exceeds the revenue gained from selling it.

Economically Efficient

A situation where resources are allocated in a way that maximizes the net benefit to society or an economy.