What is the relationship between investing risk and return?

The correlation between the hazards one runs in investing and the performance of investments is known as the risk-return tradeoff. The risk-return tradeoff states the higher the risk, the higher the reward—and vice versa.

What is the relationship between risk and return on investment quizlet?

The higher an investment’s risk, the HIGHER the return required to induce investors to purchase the asset. This relationship between risk and return indicates that investors are risk AVERSE; investors dislike risk and require HIGHER rates of return as an inducement to buy riskier securities.

Are risk and return inversely related?

Risk and return are inversely proportionate to each other. Riskier investments tend to have lower returns as compared to T-bills, which are risk free.

What is risk in investment?

When you invest, you make choices about what to do with your financial assets. Risk is any uncertainty with respect to your investments that has the potential to negatively affect your financial welfare. For example, your investment value might rise or fall because of market conditions (market risk).

Which statement below best describes the relationship between risk and return when considering an investment?

Which of the statements below BEST describes the relationship between risk and return when considering an investment? Investors expect to earn lower return when they invest in a risky asset like a startup company. Investors expect to earn a higher return when they invest in a low risk asset like a savings account.

What is the general relationship between risk and reward quizlet?

What is the general relationship between risk and potential reward when investing? the higher the risk of loss of principal for an investment, the greater the potential reward and the lower the risk of loss of principal for an investment, the lower the potential reward.

What is the ideal investment?

The answer is often something like this: An ideal investment would have to have the following characteristics. First, it would have to have a high return. It should have a yield high enough to outperform inflation and taxes, plus a little more. Fifteen percent per year would be about right.

What is the concept of risk and return?

The risk-return tradeoff states that the potential return rises with an increase in risk. Using this principle, individuals associate low levels of uncertainty with low potential returns, and high levels of uncertainty or risk with high potential returns.

What statement is true of the relationship between risk and return?

Which statement is true of the relationship between risk and return? The greater the risk, the greater the potential return.