What is the risk/return trade-off quizlet?
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What is the risk/return trade-off quizlet?
Terms in this set (39) Risk-Return Tradeoff. There is a reward for bearing risk. The greater the potential reward, the greater the risk.
How do you calculate risk/return trade-off?
How is the Risk-Return Trade-Off Calculated?
- Alpha. Alpha measures the risk-adjusted returns of a mutual fund scheme against its underlying benchmark.
- Beta. Beta measures the volatility of the fund in line with its underlying benchmark.
- Sharpe Ratio.
- Standard Deviation.
What is risk on risk off?
Risk-on risk-off refers to changes in investment activity in response to global economic patterns. During periods when risk is perceived as low, the risk-on risk-off theory states that investors tend to engage in higher-risk investments.
What do you mean by trade-off?
Definition of trade-off 1 : a balancing of factors all of which are not attainable at the same time the education versus experience trade-off which governs personnel practices— H. S. White. 2 : a giving up of one thing in return for another : exchange. Other Words from trade-off Synonyms Learn More About trade-off.
Which is true about risk/return trade-off?
The risk-return trade-off states that the level of return to be earned from an investment should increase as the level of risk goes up. Conversely, this means that investors will be less likely to pay a high price for investments that have a low risk level, such as high-grade corporate or government bonds.
What is meant by the phrase risk/return trade-off as it applies to investing group of answer choices?
What is meant by the phrase “Risk-Return Trade-Off” as it applies to investing? Generally, what does “Risk” mean in investing? If an investor wants to earn a higher return, the investor must be willing to take higher risk; If an investor wants to take lower risk, the investor must be willing to receive a lower return.
What is meant by risk trade off?
The risk-return trade-off is the concept that the level of return to be earned from an investment should. increase as the level of risk increases. Conversely, this means that investors will be less likely to pay a. high price for investments that have a low risk level, such as high-grade corporate or. government bonds.
What is simple return?
The simple rate of return is the incremental amount of net income expected from a prospective investment opportunity, divided by the investment in it. A business would then accept a project if the measure yields a percentage that exceeds a certain hurdle rate used by the company as its minimum rate of return.
What is the risk-on trade?
In the context of trading, risk is the potential that your chosen investments may fail to deliver your anticipated outcome. That could mean getting lower returns than expected, or losing your original investment – and in certain forms of trading, it can even mean a loss that exceeds your deposit.
What is risk-on in trading?
A risk-on environment captures positive investment sentiment where investors use their capital to purchase stocks and other high-yielding instruments. An effect of a risk-on sentiment is an increase in the stock market and demand for high-yielding currencies. As a result, the carry trade strategy tends to perform well.
What is the example of trade-off?
An opportunity cost example of trade-offs for an individual would be the decision by a full-time worker to take time off work with a salary of $50,000 to attend medical school with an annual tuition of $30,000 and earning $150,000 as a doctor after 7 years of study.
What is the importance of trade-off?
A trade-off involves a sacrifice that must be made to obtain a desired product or experience. Understanding the trade-off for every decision you make helps ensure that you are using your resources (whether it’s time, money or energy) wisely.