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Risk and reward

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Describe the risk-return trade-off.

Give at least one real world example of its use.

What are the implications if an investor does not follow the risk-return trade-off.

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Solution Summary

Real world example of risk-return trade-off and the implications of its use.

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Risk and return are positively correlated, meaning that investments with high risk also have high rewards associated with them. The higher rewards are necessary to compensate for the greater risk of losing money. In the real world, we see that stocks with lower the market capitalization tend to ...

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