1. Introduction
Chapter I

2. Certainty and Uncertainty
Certainty is lack of doubt.
Uncertainty arises when future outcomes cannot be known with certainty.
Uncertainty is a subjective concept so it cannot be measured directly.

3. Risk Risk is potential variation in outcomes.
Risk can be positive (up) or negative (down) or zero (stable)
Risk is an objective concept, meaning it is measurable.

4. Jenis Risiko Pure Risk Speculative Risk
Risk that can result negatively.
For example: risk of a car accident.
Speculative Risk
Risk which can result either negatively or positively.
For example: risk of investing in stocks.

5. Sifat Risiko Systematic Risk (Non-Diversifiable Risk)
Risk which cannot be diversified.
For example: market risk.
Unsystematic Risk (Diversifiable Risk)
Risk which can be diversified.
For example: asset risk.

6. Risk vs. Return for Investors
High risk – high return.
Actual trade-off between risk and expected return.
Expected value = mean value.
Expected return is weighted average of possible returns.