4
AssignmentMultiple Choice

Taxes

Question 4 • * HSA 26-27 Economics

What rule is important to remember when evaluating risk and return?

Answer
A
The higher the risk, the higher the potential return.
B
The higher the risk, the lower the potential return.
C
The lower the risk, the higher the potential return.
D
There is no connection between risk and return.

Explanation

Risk and return generally have a positive relationship: investments with greater risk offer the possibility of greater returns as compensation for taking that risk. This does not guarantee a higher return; it means the potential return is higher. Therefore, the correct choice is “The higher the risk, the higher the potential return.”

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