What is the relationship between risk and average annual return?

First is the principle that risk and return are directly related. The greater the risk that an investment may lose money, the greater its potential for providing a substantial return. By the same token, the smaller the risk an investment poses, the smaller the potential return it will provide.

What is difference between risk and return?

Difference between Risk and Return Every investment contains some ‘risk’, though the intensity of the risk depends on the class of investment. On the other hand, ‘return’ is what every investor is after. If an investor is looking for higher returns, he must invest in the instruments containing higher risk.

How do you measure risk and return?

Risk is measured by the amount of volatility, that is, the difference between actual returns and average (expected) returns.

How do you calculate the risk and return of a portfolio?

The expected return of a portfolio is calculated by multiplying the weight of each asset by its expected return and adding the values for each investment. For example, a portfolio has three investments with weights of 35\% in asset A, 25\% in asset B, and 40\% in asset C.

Which of the following statements are true about the relationship between risk and return when it comes to investing?

Q. Which of the following statements are true about the relationship between risk and return when it comes to investing? When it comes to investing, risk and return have a direct relationship, in that the riskier an investment, the higher its expected return.

When it comes to investing what is the typical relationship between risk and return?

When it comes to investing, the typical relationship between the risks and returns was that the greater the potential risk, the greater the investment return an investor will get. That is why investments are very risky, and an investor must be a risk-taker to attain such success.

What is the difference between a risk and a return?

Return are the money you expect to earn on your investment. Risk is the chance that your actual return will differ from your expected return, and by how much. You could also define risk as the amount of volatility involved in a given investment.

Is there a positive correlation between risk and return?

There is a positive correlation between risk and return with one important caveat. There is no guarantee that taking greater risk results in a greater return. Rather, taking greater risk may result in the loss of a larger amount of capital.

What relationship does risk have to return?

In general terms, the relationship between return and risk is that “b. Investments with low risk have lower returns,” since the lower risk means that more people will usually invest.