ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The risk-return tradeoff is an investment principle that indicates that the higher the risk, the higher the potential reward. To calculate an appropriate risk-return tradeoff, investors must consider many factors, including overall risk tolerance, the potential to replace lost funds and more.

Detailed explanation-2: -The risk-reward ratio is a measure of potential profit to potential loss for a given investment or project. A higher risk-reward ratio is generally preferable because it offers the potential for a greater return on investment without undue risk-taking.

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: -Over many decades, the investment that has provided the highest average rate of return has been stocks. But there are no guarantees of profits when you buy stock, which makes stock one of the most risky investments.

Detailed explanation-5: -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.