3. Stock prices and stand-alone risk Risk is the potential for an investment to generate more than one return. A secunty that will produce onily one known return is referred to as a riskfree asset, as there is no potential for deviation from the known expected outceme. Investments that have the chance of peoducing more than one poscible outcome are called risky assets. Risk, or potential variability in an irvestinent's possible returns, occurs when there is uncertainty about an investment's future outcome, such as the return expected to be generated by the investment and reafized by an investor, As an investor and based on your understanding of risk, which of the foliowing statements is true? You should imvest in a stock if the expected rate of return on an asset with similar risk is higher than the expected rate of return from the stocki You should invest in a stock if the expected rate of return from the stock is greater than the expected rate of return on an asset with a similar risk. fiead the follawing descriptions and identify the type of risk or term being described: Read the following descriptions and identify the type of risk or term being described: You invest $100,000 in only one stock. What kind of risk will you primarily be exposed to? Portfollo risk Stand-alone risk Generally, investons would prefer to invest in assets that have: a lower-than-average expected rate of return given the percelved risk. a higher-than-aversge expected rate of return given the percoived risk