What is the relationship between risk and return? A. A higher risk often means a higher return.
B. A lower risk always means a higher return.
C. A higher risk often means a lower return.
D. A lower risk will always mean a lower return.
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What is the relationship between risk and return? A. A higher risk often means a higher return.
B. A lower risk always means a higher return.
C. A higher risk often means a lower return.
D. A lower risk will always mean a lower return.
The correct answer is: A. A higher risk often means a higher return.
Explanation: In finance, there is a general principle known as the risk-return tradeoff. This means that investments that are considered riskier tend to have the potential for higher returns, while safer investments typically offer lower returns. Investors must assess their risk tolerance when choosing investments, as there is no guaranteed return.
The correct answer is A. A higher risk often means a higher return.
Explanation: In investing, there is a common principle that suggests that investments with higher risks tend to offer the potential for higher returns. This is because investors are typically rewarded for taking on more risk, as there is a greater chance of loss. Conversely, lower-risk investments usually provide more stable but lower returns. It’s important to assess your risk tolerance before making investment decisions.