Question

When considering investment alternatives, its important to remember the relationship between risk and return, which is:__________

1.the lower the risk,
2.the lower the return the higher the risk,
3.the lower the return the lower the risk,
4.the higher the return the higher the return,
5.the higher the risk both the higher the return,
6.the higher the risk; and the lower the return,
7.the lower the risk

Answer 1

Answer:

Option 2 and option 5 both are correct

Explanation:

It is vital to understand the relationship between risk and return before investing. People have different perspectives regarding risk and return but, one thing is understandable and work every time. High risk leads to higher returns and low risk leads to lower returns. The risk lovers take a risk and earn abnormal profits or lose a substantial amount. Similarly, risk-averse people earn normal profits and bear less risk.