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How is the potential rate of return on investments related to the level of risk?
Higher risk investments have a higher potential return.
High return on an investment is associated with?
higher risk. The higher the potential return, the higher the potential risk because there is a greater chance of losing money. High returns often come from investments with higher volatility and uncertainty, such as stocks or speculative assets, which carry greater risks compared to more conservative investments like bonds or savings accounts.
What does the risk-return trade-off mean?
In trading and investing, the risk is almost always higher if the return is expected to be greater.The risk-return trade off refers to the direct correlation between risk and return. An investor putting funds into a very low risk investment such as short term government bonds does not expect to incur a loss but will also have no opportunity for a high rate of return. Investing in higher risk ventures such as start up companies, initial public offerings, or common stock can result in significant loss but also offers the potential for out sized returns. Most investors understand that the higher the risk, the higher the potential returns.
Basic concept of risk and return?
The higher the risk, the higher the return.
do Investors demand higher expected rates of return on stocks with more variable rates of return?
Yes, investors typically demand higher expected rates of return on stocks with more variable rates of return, a concept known as risk-return tradeoff. Stocks that exhibit higher volatility are perceived as riskier investments, leading investors to seek greater compensation for taking on that additional risk. This expectation aligns with the principles of modern portfolio theory, where higher risks should correlate with higher potential rewards. Thus, more variable stocks generally attract higher required returns to entice investors.
What is the relationship between risk and return in investment decisions?
The relationship between risk and return in investment decisions is that generally, higher returns are associated with higher levels of risk. Investors must weigh the potential for greater returns against the possibility of losing money when making investment decisions.
How do you get a higher rate of return?
Just as getting more money produces a higher rate of return, getting the money sooner also produces a higher rate of return.
How do financial decision involve risk return trade off?
The principle that potential return rises with an increase in risk. Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns. According to the risk-return tradeoff, invested money can render higher profits only if it is subject to the possibility of being lost.-- Raju R akki
When an atom has a higher potential energy than it has in its ground state it is in and what state?
When an atom has a higher potential energy than it has in its ground state, it is in an excited state. In this state, one or more of its electrons have absorbed energy and moved to a higher energy level. This excited state is typically unstable and can return to the ground state by releasing energy, often in the form of light or heat.
What is risk return ratio?
The risk-return ratio is a financial metric that compares the expected return of an investment to the amount of risk involved in that investment. It helps investors evaluate the potential reward of an investment relative to its risk, allowing for better decision-making. A higher risk-return ratio indicates that an investment may offer a more favorable return for the level of risk taken, while a lower ratio suggests that the potential return may not be worth the risk. Investors often use this ratio to assess and compare different investment opportunities.
What is the earning potential on your savings?
Rate of return
What has the most potential energy higher or lower?
Higher
