What type of risk involves both the possibility of loss and profit?

The correct choice is speculative risk, which involves situations where there is both the possibility of loss and the potential for profit. This type of risk is typically associated with investments and business ventures, where the outcomes can lead to financial gain or loss. For example, investing in stocks carries speculative risk because the value can rise, offering profits, or fall, resulting in losses.

In contrast, pure risk only involves the probability of loss or no change, where there is no potential for profit. Examples of pure risk include natural disasters, theft, or liability claims, where the circumstances can only lead to a loss.

Systematic risk refers to the risk inherent to the entire market or an entire market segment, often influenced by external factors like economic events, and does not specifically imply the possibility of profit.

Basic risk is a term typically used in the context of hedging strategies, referring to the risk that the price of a hedging instrument does not move in perfect correlation with the price of the asset being hedged.

Thus, speculative risk is distinct in that it allows for the possibility of earning a return, while the others do not encompass this aspect.