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: -What is a high-risk, high-return investment? 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.

Detailed explanation-3: -"The higher the potential return on an investment, the higher the risk.” means the more money you can make on an investment, the greater chance that you will lose your money.

Detailed explanation-4: -Risk Return Trade Off Explained According to the risk-return trade-off, the potential reward should increase if there is also an increase in risk. Individuals tend to link low levels of uncertainty with low potential rewards, whereas high levels of uncertainty or risk are associated with large potential returns.

Detailed explanation-5: -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.