Final answer:
Price risk is a speculative risk, presenting both the potential for gain and loss, whereas credit risk is a pure risk, typically only offering the possibility of loss. Both are important considerations in the expected rate of return and actual rate of return for financial assets.
Step-by-step explanation:
Price risk and credit risk are classifications within the world of financial risk management. Price risk is associated with the potential for the price of a financial asset to fluctuate, which can be due to market changes, economic events, or other factors. This kind of risk is considered a speculative risk because it presents both the possibility of gain and the potential for loss. Credit risk, on the other hand, is the risk of loss due to a borrower's inability to make payments as agreed upon in a credit contract, like failing to pay back a bond or loan. This is typically considered a pure risk because it generally only presents the possibility of loss, not gain.
In the context of financial assets and investment considerations, expected rate of return is crucial as it indicates the potential profitability of an investment. Actual rate of return is what the investor ultimately receives, which can vary from the expected return due to various risks, including price and credit risks. Investors must weigh these considerations against their individual risk tolerance and investment goals.