The Risk/return Trade-Off Investors Assume Means

question 104

Multiple Choice

The risk/return trade-off investors assume means

• A) the less you risk, the more you stand to gain.
• B) the same as diversification of your portfolio.
• C) you will assume added risk, if you believe you can get a greater return.
• D) the goal is to never risk liquidity; your investments should always be liquid and of short duration.

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Definitions:

Pure Rate

This term might refer to the basic interest rate or insurance premium rate without including any modifications, but clarification is needed as "pure rate" can have context-dependent meanings.

Theoretical Rate

An ideal or estimated rate used in calculations or theories, often not observed in real-life scenarios.

Loan Amount

The sum of money borrowed from a lender that is expected to be paid back with interest.

Annual Interest

The amount of money that is paid in interest on an investment, loan, or savings account over the course of a year.