The ex ante risk-return trade-off as its basic principle suggests:
A) a higher expected return for investors who take on higher expected risk.
B) a lower expected return for investors who take on higher expected risk.
C) the same expected return for investors who take on higher expected risk.
D) the amount of expected return for investors is not directly related to the amount of expected risk.

Question

Quizplus · Accepted Answer

The ex ante risk-return trade-off principle suggests that investors who are willing to take on higher levels of risk are typically rewarded with higher expected returns. This principle is foundational in finance, reflecting the trade-off between risk and potential reward.

The Ex Ante Risk-Return Trade-Off as Its Basic Principle Suggests