To attract capital from outside investors, a firm must offer potential investors an expected return that is commensurate with the level of risk that they can bear.

Question

Quizplus · Accepted Answer

This statement is true. Investors will only choose to invest in a firm if they believe that they will receive an appropriate return on their investment relative to the level of risk they are taking on. If the expected return is not enough to compensate for the level of risk, investors will not be interested in investing.

To Attract Capital from Outside Investors, a Firm Must Offer