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lesson pretestMultiple Choice

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Question 1 • Economics

What is the relationship between risk and return?

Answer
A
A lower risk will always mean a lower return.
B
A higher risk often means a higher return.
C
A higher risk often means a lower return.
D
A lower risk always means a higher return.

Explanation

In general, investments with higher risk offer the potential for higher returns to compensate investors for taking on more uncertainty. This is not guaranteed: a risky investment can also lose value. Therefore, “a higher risk often means a higher return” is the best choice.

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