MANAGEMENT

Detailed explanation-1: -Definition: Higher risk is associated with greater probability of higher return and lower risk with a greater probability of smaller return. This trade off which an investor faces between risk and return while considering investment decisions is called the risk return trade off.

Detailed explanation-2: -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-3: -The Modern Portfolio Theory (MPT) refers to an investment theory that allows investors to assemble an asset portfolio that maximizes expected return for a given level of risk.

Detailed explanation-4: -The term return refers to income from a security after a. defined period either in the form of interest, dividend, or market appreciation in security. value. On the other hand, risk refers to uncertainty over the future to get this return. In simple words, it is a probability of getting return on security.

Detailed explanation-5: -The risk-free rate of return is the theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.