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.

---

Definitions:

Budgeted Cash Receipts

An estimation of the cash inflows that the organization anticipates receiving during a particular period, often as part of a budgeting process.

Bad Debts

Unrecoverable accounts receivable that a business deems uncollectible, similar to bad debt expense but focused on the receivable aspect.

Month of Sale

Refers to the specific month in which a sale was completed or recognized, used in accounting and financial reporting.

Merchandise Purchases

The cost of goods bought for resale during a specific accounting period.