2. Stock prices and stand-alone risk

Read the following descriptions and identify the type of risk or term being described:

1)

This type of risk relates to problems caused by political instability.
This type of risk is inherent in a firms operations.
A listing of each possible outcome and the probability of each outcome occurring.
This can be used to reduce the stand-alone risk of an investment by combining it with other investments in a portfolio.

2)

You invest $100,000 in 40 stocks, 20 bonds, and a certificate of deposit (CD). What kind of risk will you primarily be exposed to?

Stand-alone risk OR Portfolio risk?

3) Generally, investors would prefer to invest in assets that have:

a higher-than-average expected rate of return given the perceived risk.

OR

a lower-than-average expected rate of return given the perceived risk.

?