. Stock prices and stand-alone risk Aa Aa Risk is the potential for an investment to generate more than one return. A security that will produce only one known return is referred to as a risk-free asset, as there is no potential for deviation from the known expected outcome. Investments that have the chance of producing more than one possible outcome are called risky assets. Risk, or potential variability in an investment'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 realized by an investor Generally, investors would prefer to invest in assets that have: O A lower-than-average expected rate of return given its perceived risk O A higher-than-average expected rate of return given its perceived risk Read the following descriptions and identify the type of risk or term being described: Description Terms This type of risk relates to problems caused by political instability The difference between the expected rate of return on o given risky asset and [ the expected rate of return on a less risky asset A measure of the variability of a set of outcomes This type of risk relates to the possibility that a firm wll not be able to service its existing debt