Which one of the following statements concerning the risk-return-trade-off is incorrect?
A) The risk-return-trade-off is the right balance between risk and return.
B) Higher risk yields lower potential returns.
C) The more money a firm borrows, the greater the risks to shareholders.
D) Failure to invest surplus funds means lower returns.

Question

Quizplus · Accepted Answer

The incorrect statement is B) Higher risk yields lower potential returns. This is incorrect because the general principle of the risk-return trade-off is that higher risk is associated with the potential for higher returns, not lower.

Which One of the Following Statements Concerning the Risk-Return-Trade-Off Is