MANAGEMENT

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: -According to standard finance, risk and return are positively correlated, but many studies conducted in the behavioral finance and prospect theory context have revealed that risk and return are not positively correlated, but are negatively correlated.

Detailed explanation-3: -To put it simply, risk and the required rate of return are directly related by the simple fact that as risk increases, the required rate of return increases. When risk decreases, the required rate of return decreases.

Detailed explanation-4: -Which statement is true of the relationship between risk and return? The greater the risk, the greater the potential return.

Detailed explanation-5: -Risk is a chance of financial loss, while returns are monies the insurance company receives for incurring a given level or risk. If the risk is high, insurance companies are expecting a high return or premium.