Question:
Which of the following is true of risk?
A. Risk and return are inversely proportionate to each other.
B. The higher the risk associated with a security the lower is its return.
C. Risk is a measure of the uncertainty surrounding the return that an investment will earn.
D. Riskier investments tend to have lower returns as compared to T-bills, which are risk free.
Risk and Return:
The relationship between risk and return is central to portfolio selection and wealth management. Modern portfolio theory characterizes an asset's risk based on its relationship to the overall market portfolio. The capital asset pricing model then relates the asset's risk to its required return.
Answer and Explanation:1
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The answer is C. Risk is a measure of the uncertainty surrounding the return that an investment will earn.
Risky assets provide uncertain returns....
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