How Might You Explain The Concept Of Risk Vs Return Trade Off During A Shareholders Meeting?

Definition:

Higher risk is associated with greater probability of higher return and lower risk with a greater probability of smaller return

. This trade off which an investor faces between risk and return while considering investment decisions is called the risk return trade off.

What is the concept of risk and return trade off?

The risk-return tradeoff states

that the potential return rises with an increase in risk

. Using this principle, individuals associate low levels of uncertainty with low potential returns, and high levels of uncertainty or risk with high potential returns.

How do you explain risk and return?

The risk-return tradeoff states

that the potential return rises with an increase in risk

. Using this principle, individuals associate low levels of uncertainty with low potential returns, and high levels of uncertainty or risk with high potential returns.

How does risk and return affect shareholders?

Using this principle, individuals associate

low levels of uncertainty

with low potential returns, and high levels of uncertainty or risk with high potential returns. According to the risk-return tradeoff, invested money can render higher profits only if the investor will accept a higher possibility of losses.

How is the risk/return trade off can be applied in real life?

• Running a marathon: Going too hard.
• Singing: Belting high notes.
• Legal: Breaking the law.
• Politics: Having a voice.
• Academics: Controversial takes.
• Basketball: Going for the steal.
• Mating.

What is an example of risk and return?

Description: For example,

Rohan faces a risk return trade off while making his decision to invest

. If he deposits all his money in a saving bank account, he will earn a low return i.e. the interest rate paid by the bank, but all his money will be insured up to an amount of….

What is relationship between risk and return?

The risk-return tradeoff states

the higher the risk, the higher the reward—and vice versa

. Using this principle, low levels of uncertainty (risk) are associated with low potential returns and high levels of uncertainty with high potential returns.

What is risk and return in business?

The term “risk and return” refers

to the potential financial loss or gain experienced through investments in securities

. Return on investment can be measured by nominal rate or real rate (money earned after the impact of inflation has been figured into the value of the investment). …

What is the risk/reward relationship?

The risk–return spectrum (also called the risk–return tradeoff or risk–reward) is

the relationship between the amount of return gained on an investment and the amount of risk undertaken in that investment

. The more return sought, the more risk that must be undertaken.

Why is it a bad idea in investing in just one investment?

Cons include

more difficulty diversifying your portfolio

, a potential need for more time invested in your portfolio, and a greater responsibility to avoid emotional buying and selling as the market fluctuates.

What relationship does risk have to return quizlet?

The relationship between risk and required rate of return is known as the risk-return relationship. It is a

positive relationship

because the more risk assumed, the higher the required rate of return most people will demand. Risk aversion explains the positive risk-return relationship.

Which characteristic is most important in determining an investment’s level of risk?

Predictability

would be your answer. The level of predictability helps Investors determine the level of risk their investment(s) has/have.

What do u mean by risk?

What Is Risk? Risk is defined in financial terms as

the chance that an outcome or investment’s actual gains will differ

from an expected outcome or return. Risk includes the possibility of losing some or all of an original investment.

How do you calculate risk?

There is a definition of risk by a formula: “

risk = probability x loss”

. What does it mean? Many authors refer to risk as the probability of loss multiplied by the amount of loss (in monetary terms).

How do we measure risk?

1. economic risks,
2. industry risks,
3. company risks,
4. asset class risks,
5. market risks.