The relationship between risk and return is positive because
A) the longer the term of the investment, the more exposed it is to negative inflation effects.
B) investors need to be compensated with additional return on investment to bear additional risk.
C) not every investment has risk, so there is really no distinct relationship.
D) Both A and B are correct.

Question

Quizplus · Accepted Answer

Investors demand higher returns as compensation for taking on more risk, which establishes a positive relationship between risk and return.

The Relationship Between Risk and Return Is Positive Because