What is meant by risk and return?

It is the uncertainty associated with the returns from an investment that introduces a risk into a project. The expected return is the uncertain future return that a firm expects to get from its project. Risk is associated with the possibility that realized returns will be less than the returns that were expected.

What is the difference between risk and return in finance?

Return are the money you expect to earn on your investment. Risk is the chance that your actual return will differ from your expected return, and by how much. You could also define risk as the amount of volatility involved in a given investment.

What is risk in financial management?

Risk is defined in financial terms as the chance that an outcome or investment’s actual gains will differ from an expected outcome or return. Risk includes the possibility of losing some or all of an original investment. In finance, standard deviation is a common metric associated with risk.

What is an example of risk and return?

Description: For example, Rohan faces a risk return trade off while making his decision to invest. If he deposits all his money in a saving bank account, he will earn a low return i.e. the interest rate paid by the bank, but all his money will be insured up to an amount of….

What is the relationship between risk and return?

The relationship between risk and return is fundamental to making good investment decisions. Put simply, the greater the risk associated with an investment, the greater the potential return. The opposite is also true: The safer an investment, the less potential return.

What is the concept of risk and return?

risk and return. Definition. A concept whereby an investor must realize the impossibility of achieving a return on their investment without facing the certain amount of risk involved the process.

What is risk return in finance?

The term “risk and return” refers to the potential financial loss or gain experienced through investments in securities. An investor who has registered a profit is said to have seen a “return” on his or her investment. The “risk” of the investment, meanwhile, denotes the possibility or likelihood that the investor could lose money.

How are risk and return related?

In investing, risk and return are highly correlated . Increased potential returns on investment usually go hand-in-hand with increased risk. Different types of risks include project-specific risk, industry-specific risk, competitive risk, international risk, and market risk. Return refers to either gains and losses made from trading a security.