ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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.

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: -High-risk investments may offer the chance of higher returns than other investments might produce, but they put your money at higher risk. This means that if things go well, high-risk investments can produce high returns. But if things go badly, you could lose all of the money you invested.

Detailed explanation-4: -The general concept of risk and return is that the greater the risk the greater the return. That is, the more risk an investment is exposed to the more the return on the investment.

Detailed explanation-5: -Which statement is true of the relationship between risk and return? The greater the risk, the greater the potential return.