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 -Select- the return required to induce investors to purchase the asset. This relationship. between risk and return indicates that investors are risk -Select- ; investors dislike risk and require -Select- rates of return as an inducement to 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. buy riskier securities. A -Select-