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Risk vs. Returns

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How would you weigh risk against return?

Is there a point when return makes risk invalid?

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Solution Summary

This solution is about risks and returns.

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In business there is a term called risk-return tradeoff which means that potential return rises with an increase in risk. Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns. According to the risk-return tradeoff, invested money can render higher profits only if it is subject to the possibility of being lost.

The point is that risk becomes invalid when returns of a ...

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