In equilibrium,low risk assets earn a _______return than high risk assets
A)higher
B)lower
C)similar
D)none of the above

Question

​In equilibrium,low risk assets earn a _______return than high risk assets
A)​higher
B)lower
C)similar
D)​none of the above

Quizplus · Accepted Answer

In equilibrium, low risk assets earn a lower return than high-risk assets because investors are willing to accept lower returns for lower risk. This is known as the risk-return tradeoff. If low-risk assets offered higher returns than high-risk assets, investors would shift their investments towards the low-risk assets, driving up their prices and pushing down their returns until they were lower than the high-risk assets.

​In Equilibrium,low Risk Assets Earn a _______Return Than High Risk

In Equilibrium,low Risk Assets Earn a _______Return Than High Risk