Final answer:
In project management, risk can have a positive or negative impact on project objectives and is characterized by uncertainty. The expected rate of return is a projection while the actual rate of return is what the investment yields. High-risk investments have actual returns that can significantly differ from expected returns.
Step-by-step explanation:
In the context of project management, the characteristics that pertain to risk include that a risk is an uncertain event or condition that may have either a positive or negative impact on project objectives. Specifically:
- A risk may have a positive impact on project objectives (also known as an opportunity).
- A risk is an uncertain event or condition, which means there is a possibility that it may or may not happen.
- A risk may have a negative impact on project objectives (also known as a threat).
The expected rate of return is an average estimate of the gains an investment or project is projected to generate over time. It's important to understand that actual returns can differ from expected returns, influenced by the associated risks. Risk measures the uncertainty associated with the expected returns, including factors like default risk and interest rate risk. A high-risk investment is likely to see actual returns that vary widely from expected returns due to the unpredictable nature of the risk factors involved. Meanwhile, the actual rate of return refers to the actual gains an investment yields, which could include interest payments and capital gains at the end of an investment period.