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Which statement is true of the relationship between risk and return?
The greater the risk, the greater the potential return.
The relationship between risk and return is always the same.
The greater the risk, the lower the potential return.
The relationship depends on the individual investment.
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The greater the risk, the greater the potential return.
This reflects the risk–return tradeoff: investments that carry higher risk typically offer the possibility of higher returns to compensate investors, but they also carry a greater chance of loss.
This reflects the risk–return tradeoff: investments that carry higher risk typically offer the possibility of higher returns to compensate investors, but they also carry a greater chance of loss.
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