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: -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: -Risk is inseparable from return. Every investment involves some degree of risk, which is considered close to zero in the case of a U.S. T-bill or very high for something such as emerging-market equities or real estate in highly inflationary markets. Risk is quantifiable both in absolute and in relative terms.

Detailed explanation-4: -In the financial world, risk refers to the chance that an investment’s actual return will differ from what is expected-the possibility that an investment won’t do as well as you’d like, or that you’ll end up losing money.