Which of the following describes the risk-return trade-off?

Question

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The risk-return trade-off refers to the balance between the potential for gain or return and the level of risk involved. In other words, the more risk a firm takes on, the higher the potential for return, but also the greater the potential for loss. The goal is to find the right balance between risk and return that aligns with the firm's objectives and tolerance for risk. Option A is incorrect because a firm can have returns without taking on risk, although the returns may be lower than if some risk were taken. Option B is incorrect because, in reality, firms must take on some level of risk to achieve returns, and there is no binary choice between one or the other. Option D is incorrect because a risk-free return may be preferred for some investors or in some situations where the potential loss from taking on risk is too great.

Which of the Following Describes the Risk-Return Trade-Off