BUSINESS FINANCE

RISK RETURN
TRADE-OFF
GROUPP 5
RISK RETURN TRADE-OFF

LEARNERS WILL BE ABLE TO

KNOW:
01 What is Risk Return 02 Systematic and Non- 03 Formula (standard
Trade-Off Systematic Risk deviation)
 RIMBERIO CO

WHAT IS RISK RETURN

TRADE-OFF?
The risk-return tradeoff states that the According to the risk-return
potential return rises with an increase in risk.
Using this principle, individuals associate low tradeoff, invested money
levels of uncertainty with low potential returns, can render higher profits
and high levels of uncertainty or risk with high
potential returns.The risk-return tradeoff only if the investor will
states that the potential return rises with an accept a higher possibility
increase in risk. Using this principle, individuals
associate low levels of uncertainty with low of losses.
potential returns, and high levels of
uncertainty or risk with high potential returns.
Business is prone to risk.

No Risk, No Return
Low Risk=Low Return

High Risk=High Return

 Risk- probability
that actual return
will be different
Return varies with the from expected
return.
amount of risk an
investor is willing to
consume
Return- profit
on an
investment.