Question

If a company becomes more risky the rate of return investors require will likely…

Answer 1

For any investment decision, the investor must understand and consider risk and return of the investment. There is direct relationship between risk and return. When the risk of the investment increases the return of the investment is also increases. And when risk of the investment decreases the return of the investment also decrease.

So, while making any investment, the investor must consider the level of risk in various investments and their return and after comparison he has to invest.

If a company becomes more risky the rate of return investors require will likely tobe higher.