Risk is an important concept affecting security prices and rates of return. Risk is the chance that some unfavorable event will occur, and there is a trade-off between risk and return. The higher an investment's risk, the the return required to induce investors to purchase the asset. This relationship between risk and return indicates that investors are risk; investors dislike risk and require rates of return as an inducement to buy riskier securities. A represents the additional compensation investors require for bearing risk; it is the difference between the expected rate of return on a given risky asset and that on a less risky asset. An asset's risk can be considered in two ways: On a stand-alone basis and in a portfolio context.

Question

Business

Hector Wagner

4 April, 05:37

Risk is an important concept affecting security prices and rates of return. Risk is the chance that some unfavorable event will occur, and there is a trade-off between risk and return. The higher an investment's risk, the the return required to induce investors to purchase the asset. This relationship between risk and return indicates that investors are risk; investors dislike risk and require rates of return as an inducement to buy riskier securities. A represents the additional compensation investors require for bearing risk; it is the difference between the expected rate of return on a given risky asset and that on a less risky asset. An asset's risk can be considered in two ways: On a stand-alone basis and in a portfolio context.

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Answers (1)

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Jack Henson · Answer 1

The correct answer is Risk.

Explanation:

Risk is exposure to a situation where there is a possibility of harm or danger. It is the vulnerability or threat to occur an event and its effects are negative and that someone or something may be affected by it. When a subject is said to be at risk, it is because he is considered to be at a disadvantage compared to something else, either because of his location or position; in addition to being susceptible to receiving a threat regardless of its nature.