1. Based on what you know how would you explain the risk return tradeoff? In financial terms, the risk return tradeoff is the chance that the actual return gained from an investment will be different than the expected rate of return for that investment. Measured in statistical terms, the variance between the actual rate of return and the expected rate of return is referred to as standard deviation. Similar to gambling, a high possibility of investment risk is normally associated with the possibility of a high rate of return. Conversely, a low possibility of investment risk is normally associated with the possibility of a low rate of return. 2. How would you adapt beta to create a different measure of risk of an asset relative to the market or a portfolio?
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