The higher the perceived risk, the higher the required rate of return.

Name: The higher the perceived risk, the higher the required rate of return.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

This is a commonly accepted principle in finance. When investors perceive an investment as riskier, they will demand a higher rate of return to compensate for that risk. This is because they want to be rewarded for taking on the additional risk, and they want to ensure that the return they receive is commensurate with the amount of risk they are taking.

The Higher the Perceived Risk, the Higher the Required Rate