If the total risk of ﬁrm X is greater than that of ﬁrm Y, then the beta of ﬁrm X must be greater than
that of ﬁrm Y.

Name: If the total risk of ﬁrm X is greater than that of ﬁrm Y, then the beta of ﬁrm X must be greater than that of ﬁrm Y.
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Question

Quizplus · Accepted Answer

The total risk includes both systematic and unsystematic risk, while beta only measures systematic risk. Firm X could have higher total risk due to higher unsystematic risk, not necessarily a higher beta.

If the Total Risk of ﬁRm X Is Greater Than