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Define Risk and Return and Discuss the Relation Between Them

question 146

Essay

Define risk and return and discuss the relation between them.


Definitions:

Market Rate

The prevailing interest rate available in the marketplace on investments, loans, and deposits.

Expected Rate

Expected Rate often refers to the return that investors anticipate earning on an investment over a certain period.

Risk-Free Rate

The theoretical return on investment with no risk of financial loss, often represented by the yield on government bonds.

Actual Return

The real gain or loss experienced on an investment over a specified period, typically expressed as a percentage.

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