The Principle of Risk-Return Trade-Off Means That

question 30

Multiple Choice

The principle of risk-return trade-off means that

• A) higher risk investments must earn higher returns.
• B) an investor who takes more risk will earn a higher return.
• C) a rational investor will only take on higher risk if he expects a higher return.
• D) an investor who bought stock in a small corporation five years ago has more money than an investor who bought U.S. Treasury bonds five years ago.

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Definitions:

Decrease Cash

Decrease cash refers to a reduction in the amount of money and cash equivalents available in a company, which can result from paying expenses, purchasing assets, or distributing dividends.

Inventory Method

An accounting approach used to value and manage the inventory a business holds, affecting cost of goods sold and ending inventory.

Accounts Payable Turnover Ratio

A financial efficiency ratio that measures how many times a company pays off its suppliers during a specific period.

Interest Expense

The cost incurred by an entity for borrowed funds, shown as an expense on the income statement.