Most investors have an expected outcome associated with an investment, and risk refers to the potential for receiving an outcome or return that is greater or less than his or her expected return. It is not surprising that investors don't mind receiving investment returns that exceed their expected return, but they tend to respond differently if the investment can generate a lower return. This potential for outcome is the risk on which most investors focus. In general, the majority of investors, or those buying and selling securities, are assumed to be that they won't purchase or sell risky securities or projects, it simply means that they premium or additional return for taking on projects or securities exhibiting additional risk. This does not mean be compensated with a risk Greta So investors require a given amount of return for investing in a risk-free investment, and then require an additional risk premium if they invest in projects or securities that exhibit risk? Is that correct? Izzy That's absolutely correct! And the magnitude of the risk premium will as the amount of risk exhibited by the investment increases. So the riskiest investments require the risk require risk premiums, and investments exhibiting relatively little isk premiums Greta OK, that makes sense, but how do you know how risky an investment is? Izzy It depends on how many investments you hold. If you hold only one investment-not just one type, such as one house, one car, one savings account, but one of all possible investments-then you can measure the riskiness of that investment by calculating the of the investment's possible returns. If you're holding a portfolio of assets, on the other hand, then the risk that is of greater interest is the riskiness, and how the addition of a new security or asset would affect the overall riskiness of the portfolio. This brings us to a related concept: the advantages and disadvantages of