Question

What are the factors that cause variations in return and risk?

Answer 1

Rate of return is directly proportional to the risk involved in the investment.

The factors that cause variations in the return and risk are broadly classified under 2 heads:

1) Systemic

2) Unsystemic.

Systemic risks include the changes in the socio-economic status of the socity while unsystemic risks include labor strike, inefficiency of the management, scarcity of the raw material etc