Question

n seeking a balance between the opportunity for profit and the potential for loss, a financial manager is dealing with the concept of _____ trade-off.

Answer 1

Answer:

The correct answer is risk-return.

Explanation:

The relationship between profitability and risk can be stated in other terms. When faced with a high level of uncertainty about the outcome of an investment, one might expect higher remuneration to outweigh the high risk.

For example, if you lend money to someone with a timely repayment history of your loans, you could accept a low interest rate in return. However, if you lend money to a manifestly unreliable person, you are likely to demand higher returns to compensate for the increased risk of default. This is often called the risk-benefit balance.