Which of the following statements is correct?
A) The greater the risk associated with an investment, the lower the return investors expect from it.
B) When choosing between two investments that have the same level of risk, investors prefer the investment with the higher return.
C) If two investments have the same expected return, investors prefer the riskiest alternative.
D) When choosing between two investments that have the same level of risk, investors prefer the investment with the lower return.

Question

Quizplus · Accepted Answer

This statement is known as the risk-return tradeoff principle, which means that investors expect a higher return from an investment if it has a higher risk level. However, if two investments have the same level of risk, investors will choose the investment with a higher return. Therefore, option B is correct. Options A, C, and D are incorrect because they don't reflect the risk-return trade-off principle accurately.

Which of the Following Statements Is Correct