CHAPTER 8 QUESTIONS 1. What does it mean to take risk when investing? 2. How are risk and return of an investment measured? 3. How can investors reduce risk? 4. For what type of risk is an average investor rewarded? a. What is the difference between firm-specific risk and market risk? b. Which risk is relevant when determining a stock's required rate of return? Why? C. Which risk is measured by a stock's beta coefficient, B? 5. What actions do investors take when the return they require to purchase an investment is different from the return the investment is expected to produce