First is the principle that risk and return are directly related. The greater the risk that an investment may lose money, the greater its potential for providing a substantial return. By the same token, the smaller the risk an investment poses, the smaller the potential return it will provide.
there is a positive relationship between risk and return. the more risk an investor is willing to accept, the higher the expected return must be.
Answer: The relationship between risk and return is directly proportional. Higher risks give higher returns and vice versa.
The relationship between risk and return is a fundamental concept in investing. Generally, a higher risk often means a higher return.
The term return refers to income from a security after a. defined period either in the form of interest, dividend, or market appreciation in security. value. On the other hand, risk refers to uncertainty over the future to get this return. In simple words, it is a probability of getting return on security.
As a result, there's a direct correlation between risk and return. For a higher level of risk, we expect a high return or our customers to pay a higher premium. In purchasing an insurance product, the customer has transferred the risk to an insurance company. This strategy is called risk transfer.
Answer and Explanation:
Option b is correct because there is a direct relationship exist between the risk and return which states that the higher the risk, the higher is the return, and the lower the profit lower is the return.
Risk and Return
While highly liquid assets may appear less risky on the surface, they often come with lower potential returns. This means that investors may need to take on additional risk in their portfolios or accept lower returns to achieve their financial goals if they focus exclusively on liquid assets.
Financial decisions are taken on the basis of return and risk involved. It is the basic principle of investment, accordingly, if the high risk is involved in doing or accepting a proposal, it should yield more returns. The goal of financial decision-making is to earn a maximum return with minimum risk.
The appropriate answer to the question is Option A: direct. In the context of investing, a direct or positive correlation means that as the level of risk increases, the potential for higher returns also increases. Conversely, lower-risk investments tend to offer lower expected returns.
Review the risk–return relationship. Explain that in general, the greater the risk, the greater the potential return. The lower the risk, the lower the potential return. A higher-risk investment can also have the potential for a greater loss.
Stockholders, or shareholders, can primarily make money in 2 ways: Share appreciation. When a company does well financially or becomes more desirable, the price of its stock can increase. This allows investors to sell their shares to other investors for more than they paid.
The greater the risk, the greater the potential return.
ANY items(s) purchased that you don't love may be exchanged or returned, including Sale & Clearance merchandise and items received as gifts. Merchandise must be unwashed, unworn, and otherwise in its original condition. Returns must be made within 30 days of the date of purchase and be accompanied by a valid receipt.
The risk–return spectrum (also called the risk–return tradeoff or risk–reward) is the relationship between the amount of return gained on an investment and the amount of risk undertaken in that investment. The more return sought, the more risk that must be undertaken.
A positive correlation exists between risk and return: the greater the risk, the higher the potential for profit or loss. Using the risk-reward tradeoff principle, low levels of uncertainty (risk) are associated with low returns and high levels of uncertainty with high returns.
Liquidity risk is inherent to the Bank's business. It results from different maturity profiles between assets and liabilities. It can arise if the Bank is unable to obtain new financing or convert liquid assets into cash without incurring significant losses.
Risk-return tradeoff is the trading principle that links risk with reward. According to risk-return tradeoff, if the investor is willing to accept a higher possibility of losses, then invested money can render higher profits.
Answer and Explanation:
A central implication from modern portfolio theory is that risk and returns are positively correlated.
Difference between risk and return
The return you get is a reward for the high risk you were willing to take. On the contrary, if an investment is considered low-risk or extremely safe, it generally leads to lower returns. This is because the market does not reward low-risk investments with substantial profits.
Assets like real estate, private equity, and collectibles (the least liquid)
If you want low risk and high return, you're going to have to give up liquidity. You're probably going to be putting your money into something like real estate. If you want high liquidity and high return, you're going to have to take on some significant risk.
The Capital Asset Pricing Model (CAPM) is a model that describes the relationship between the expected return and risk of investing in a security. It shows that the expected return on a security is equal to the risk-free return plus a risk premium, which is based on the beta of that security.