Chapter 12, Problem 8Q

Summary Introduction

To identify: The reason for the focus on stand-alone risk.

Introduction:

Market Risk:

Beta risk is a systematic risk that can be reduced through a diversified portfolio or investment projects. It is based on the market related and known as market risk.

Stand-Alone Risk:

Stand-alone risk is based on the assumption that only one project is available with the company and the single stock is available for the investors. Therefore, the stand-alone risk cannot be diversified.