In financial investment, a riskier asset typically has:
A) a higher expected return.
B) a lower expected return.
C) the same expected return as a less risky asset.
D) a higher or lower expected return, depending on the industry.

Question

Quizplus · Accepted Answer

According to the principle of risk-return tradeoff, a riskier asset typically has a higher expected return as investors demand compensation for the additional risk they are taking on. This means that investors require a higher return to invest in a riskier asset compared to a less risky asset.

In Financial Investment, a Riskier Asset Typically Has