Final answer:
The relationship between risk and return in investment depends on the specific investment. Higher risk might lead to higher potential returns, but also greater potential for loss, while lower risk tends to offer more stable but typically lower returns. The actual rate of return could vary and is influenced by the level of associated investment risk.
Step-by-step explanation:
The relationship between risk and return in the context of an investment is an essential concept in finance. The correct statement that describes their relationship is: d. The relationship between risk and return depends on the specific investment. Generally, higher risk is associated with the potential for higher return, but it's not guaranteed, and lower risk is typically associated with lower return, seeking to maintain the principal investment.
The expected rate of return is an estimation of how much one can expect to earn from an investment. Meanwhile, 'risk' is the uncertainty associated with the level of return you might receive; it can include aspects like default risk, where there's a chance the borrower won't repay, or interest rate risk, where interest rates may change after you've locked in an investment at a lower rate.
A high-risk investment could yield much higher or lower actual returns than expected, while a low-risk investment tends to yield a return that is close to the expected rate. It is worth noting that examining risk and return over different time frames can be useful for making informed investment decisions.