Consider the basic risk-return tradeoff relationship below: Pt = E(rt+1) = Expected Future Payoff 1+E (rt+1) Expected Future Payoff Pt - If you have two securities to invest in, which one of the following is true? Riskier security should have lower current price and lower discount rate. Riskier security should be discounted less, thus giving them a higher expected return. Riskier security should be discounted more, thus having higher expected return. Riskier security should have higher current price and higher expected return. 1