Taussig Technologies is considering two potential projects, X and Y. In assessing the projects' risks, the company estimated the beta of each project versus both the company's other assets and the stock market, and it also conducted thorough scenario and simulation analyses. This research produced the following numbers: Which of the following statements is correct?
A) Project X has more stand-alone risk than Project Y.
B) Project X has more corporate (or within-firm) risk than Project Y.
C) Project X has more market risk than Project Y.
D) Project X has the same level of corporate risk as Project Y.

Question

Taussig Technologies is considering two potential projects, X and Y. In assessing the projects' risks, the company estimated the beta of each project versus both the company's other assets and the stock market, and it also conducted thorough scenario and simulation analyses. This research produced the following numbers:  Which of the following statements is correct?
A) Project X has more stand-alone risk than Project Y. 
B) Project X has more corporate (or within-firm) risk than Project Y. 
C) Project X has more market risk than Project Y. 
D) Project X has the same level of corporate risk as Project Y.

Quizplus · Accepted Answer

The beta of Project X is higher than the beta of Project Y both versus the company's other assets and the stock market, indicating that Project X has more market risk. The information given does not allow us to determine which project has more stand-alone or corporate risk.

Taussig Technologies Is Considering Two Potential Projects, X and Y