What is the risk-return trade-off?
A) Assets with the least risk tend to outperform the market.
B) To invest in less risky assets means higher returns.
C) Bonds earn higher returns than stocks because bonds are riskier.
D) To earn higher rates of return, a person must accept higher risk.

Question

Quizplus · Accepted Answer

The risk-return trade-off refers to the principle that in order to earn higher rates of return, an investor must accept a higher level of risk. This means that investments that are considered safer or have lower risk will generally earn lower rates of return, whereas investments that are considered riskier will have the potential for higher returns. Therefore, the best choice is option D.

What Is the Risk-Return Trade-Off