Any action taken by a financial manager that increases risk will also increase the required return.

Question

Quizplus · Accepted Answer

This statement is true according to the concept of the risk-return tradeoff in finance. When a financial manager takes an action that increases the risk of an investment, such as investing in a high-risk asset or increasing financial leverage, investors will demand a higher return to compensate for the additional risk. Conversely, when a manager takes measures to reduce risk, such as diversifying a portfolio or investing in low-risk assets, the required return may decrease.

Any Action Taken by a Financial Manager That Increases Risk