Chapter 13: Risk and Return

These flashcards cover the key terminology and concepts related to risk and return in investment.

Risk

The potential for loss or damage when investing.

Return

The gain or profit from an investment.

Risk-Return Tradeoff

The principle that potential return rises with an increase in risk.

Investment Portfolio

A collection of financial assets such as stocks, bonds, commodities, and cash equivalents.

Market Risk

The risk of losses in positions arising from movements in market prices.

Credit Risk

The risk that a borrower will default on any type of debt by failing to make required payments.

Diversification

A risk management strategy that mixes a wide variety of investments within a portfolio.

Expected Return

The anticipated return on an investment, taking into account all potential outcomes.