The higher the perceived risk associated with an investment, the higher its required rate of return.

Name: The higher the perceived risk associated with an investment, the higher its required rate of return.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

This is because investors demand higher returns as compensation for taking on greater risk. In other words, they need an incentive to invest in riskier options, and bigger potential rewards might provide that incentive.

The Higher the Perceived Risk Associated with an Investment, the Higher