Explain Why an Asset That Carries More Risk Should Sell

question 93

Essay

Explain why an asset that carries more risk should sell for a lower price but offer a higher expected return.

---

Definitions:

Advertising

A marketing communication that employs an openly sponsored, non-personal message to promote or sell a product, service or idea.

Fosters Competition

This term refers to the process or actions that stimulate rivalry among companies or entities, driving improvements in quality, innovation, and efficiency.

Brand Name

A name given by the maker to a product or range of products, especially a trademark.

Market Efficiency

A concept in financial economics that suggests that asset prices fully reflect all available information, meaning investors cannot consistently achieve higher returns on a risk-adjusted basis.