Which of the Following Choices Correctly Describes the Relationship Between

question 46

Multiple Choice

Which of the following choices correctly describes the relationship between risk and return?

• A) Risk and return have no relationship.
• B) Risk and return have a positive relationship.
• C) Zero risk instruments have the highest returns.
• D) The lower the risk is, the higher the return.

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Definitions:

Cash Flows Characteristics Test

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest.

Financial Asset

An intangible asset deriving value due to a contractual claim, such as cash, stock, bonds, and bank deposits.

Objective Evidence

Objective evidence refers to information, facts, or data that can be quantifiably measured or verified, uninfluenced by feelings, interpretations, or bias.

Impaired

Refers to a reduction in the recoverable value of an asset below its carrying amount on the balance sheet, indicating a loss in value that must be accounted for.