Which of the Following Describes the Risk-Return Principle

question 10

Multiple Choice

Which of the following describes the risk-return principle?

• A) In most financial markets, the greater the risk, the lower the rate of return.
• B) In a financial market, the only way to get consistently higher returns over the long run is to take more risks.
• C) In a stock market, the higher the price of the stock, the greater the risk incurred by the investor.
• D) An investment or loan has less risk if it is likely to lose value at the same time your other investments or loans do.

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Definitions:

Worker

An individual who performs tasks or services for compensation; an employee.

Variable Cost

Costs that change in proportion to the activity or volume of output in production, such as raw materials and direct labor costs.

Fixed Cost

Costs that do not vary with the level of output or sales, such as rent, salaries, and insurance.

Marginal Cost

The amount of money spent to manufacture one additional unit of a product or service.