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1.
The risk-return tradeoff concept states that _______.
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The riskier an investment is, the greater its potential return should be. The risk-return tradeoff also states that safe investments usually yield low returns, and vice versa.
2.
All of the following are elements of risk tolerance except _______.
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None of the above. All of these are elements of an investor's risk tolerance.
3.
Managing risk can help you take advantage of risk without conflicting with your risk tolerance.
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True. Diversification and maximizing your investment time horizon can minimize the negative impact of risk on your investments, allowing you to take on more risk in segments of your investment portfolio.
4.
Which of the following questions is the best indicator of your risk tolerance?
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Can you afford to lose your money? The financial consequences of poorly performing investments are the biggest determinants of your risk tolerance.
5.
A risk-averse investor _______.
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Takes on only as much risk as necessary. The risk-averse does this to achieve the level of return he or she seeks. Risk-averse investors also wish to maximize the returns they get for the level of risk they take on.