BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -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.

Detailed explanation-2: -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.

Detailed explanation-3: -Risk and return are positively related. The higher the risk the higher the return. Different finance managers will have different appetite for risk. Some will be risk takers, others will be risk averse while others will be risk neutral.

Detailed explanation-4: -According to the risk-return tradeoff, invested money can render higher profits only if the investor will accept a higher possibility of losses. Investors consider the risk-return tradeoff as one of the essential components of decision-making. They also use it to assess their portfolios as a whole.

Detailed explanation-5: -Risk takes into account that your investment could suffer a loss, while return is the amount of money that you can make above your initial investment. In an efficient marketplace, a higher risk investment will need to offer greater returns to offset the chances of loss.