at.t an important eoncept sneeting secunty prices and rates or return. Risk i. the eha ee ehst some unfavorable event wil occus, and there is a trade-o" between mk and return. The higher an nattnen nsk, the .tne a the return required to race meestes to purchase the asset. This reationship between risk and return ndicates that investors are nsk B nvestan dalke mi and require M- D rates of return as an inducement to buy riskier securities. A bearing risk; it is the difference between the expected rate of return oh 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 B represents the additional compensation investors require for and in a portfolio context