The relationship between risk and required rate of return is known as the risk-return relationship it is a positive relationship because the more risk assumed, the higher the required rate. We all know what financial risk is: the chance of losing your cash and return is what you make on an investment what many don't understand is the relationship between them. Learn the importance of the risk-return relationship in selecting a mutual fund. The risk-return relationship is explained in two separate back-to-back articles in this month’s issue this approach has been taken as the risk-return story is included in two separate but.
In the article on portfolio theory, we saw that the motivation behind the establishment of a portfolio is that risk (the bad) can be reduced without a consequential reduction in return (the. Generally, the higher the risk of an investment, the higher the potential return there is no guarantee that you will actually achieve a higher return by accepting more risk.
According to the risk-return tradeoff learn the importance of the risk-return relationship in selecting a mutual fund managing wealth. Relationship between risk and return risk and return: an introduction • risk and return: application • risk and return - reference • behavioral pitfalls. The risk return relationship is a business concept referring to therisk involved in exchange for the amount of return gained on aninvestment. Generally speaking, risk and rate-of-return are directly related as the risk level of an investment increases, the potential return.