Which of the following best defines risk-return trade-off? A) oversee

QUESTION

Which of the following best defines risk-return trade-off?

A) overseeing the collection of money owed
B) the job of acquiring and managing funds in order to accomplish the firm’s objectives
C) the balancing of the firm’s investment exposure with the expected payoffs from its investments
D) a prediction about how money will come in and go out of a firm over the next 12 months
E) a detailed financial plan showing estimated revenues and expenses for a defined time period

ANSWER

Answer: C
Explanation: C) Central to the job of financial management is risk-return trade-off, in which financial managers continually try to balance the firm’s investment risk with the expected return, or payoff, from its investments.