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The BEST statement that describes the relationship between risk and return in investments is:
"Investors expect to earn a higher return when they invest in a high risk asset."
Here's why:
1. Risk and return are closely related in investing. Generally, the higher the risk associated with an investment, the higher the potential return investors expect to receive.
2. High-risk investments such as stocks of emerging companies or speculative ventures have the potential for significant returns, but they also come with a higher chance of losing money.
3. On the other hand, low-risk investments like government bonds or savings accounts offer lower returns, but they are less likely to result in significant losses.
In summary, investors expect a higher return when they take on higher risk in their investments. It's important to consider your risk tolerance and investment goals when choosing where to invest your money.
