tocks that have more risk should have a higher expected return:Group of answer choicesbased on total riskprimarily based on unsystematic riskprimarily based on systematic risk

The expected return of stocks that have more risk should be higher primarily based on systematic risk.

Here's why:

1. Systematic Risk: This is the risk that affects all companies in the market. It's also known as non-diversifiable risk or market risk. Examples include interest rate changes, inflation, recessions, or political instability. These factors can't be eliminated by diversification.

2. Unsystematic Risk: This is the risk that affects a specific company or industry. It's also known as diversifiable risk, specific risk, or idiosyncratic risk. Examples include a change in management, product recall, or a strike. These risks can be reduced through diversification.

While both types of risks can impact the expected return, the systematic risk plays a more significant role. This is because it affects all companies and can't be eliminated through diversification. Therefore, stocks with higher systematic risk should have a higher expected return to compensate for the increased risk.