Question

The principle of risk-return tradeoff means that Group of answer choices an investor who bought stock in a small corporation five years ago has more money than an investor who bought U.S. Treasury bonds five years ago. an investor who takes more risk will earn a higher return. Lower returns for an investor implies that the investor took lower risk. a rational investor will only take on higher risk if he expects a higher return.

Answer 1

Answer: a rational investor will only take on higher risk if he expects a higher return.

Step-by-step explanation:

The risk-return tradeoff means that a rational investor will only invest in something that is risky if they get an adequate(higher) return for that risk.

This is why certain investments promise more return than others because, if an investment is risky, they need to entice people with the promise of higher return to get them to invest.

This is why Corporate bonds promise higher yields than U.S. government bonds. They are riskier and need to offer more for people to invest.