Which of the following is TRUE of risk? A. Risk and return are inversely proportionate to each other. B. Riskier investments tend to have lower returns as compared to Tdashbills which are risk free. C. Higher the risk associated with a security the lower is its return. D. Risk is a measure of the uncertainty surrounding the return that an investment will earn.

Question

Munchkin

Business

25 May, 07:55

Which of the following is TRUE of risk? A. Risk and return are inversely proportionate to each other. B. Riskier investments tend to have lower returns as compared to Tdashbills which are risk free. C. Higher the risk associated with a security the lower is its return. D. Risk is a measure of the uncertainty surrounding the return that an investment will earn.

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Answers (1)

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Makai Joyce · Answer 1

The answer is: D) Risk is a measure of the uncertainty surrounding the return that an investment will earn.

Explanation:

Investment risk refers to the probability of losing an investment. It measures the uncertainty level of earning returns from an investment.

When an investor anticipates a higher risk, he will expect higher returns. On the contrary, low risk investments (e. g. T-Bills) offer very low yields.