Which of the following statements is true?

Question

Quizplus · Accepted Answer

The higher the risk in an investment, the higher investors expect the return to be. This is because investors require compensation for taking on additional risk. The relationship between risk and return is known as the risk-return trade-off. Therefore, option B is correct. Option A is the opposite of the risk-return trade-off principle, so it is incorrect. Option C is also incorrect because higher principal amounts typically result in higher interest rates as lenders need to compensate for the additional risk associated with lending a higher amount. Option D is inconsistent with typical lending practices and is therefore incorrect.

Which of the Following Statements Is True