Read the text. Then answer the question that follows.
Baylee wants to invest money in a bicycle manufacturer. She is deciding between two
companies. Velocipede is a fairly new company with an exciting line of bikes. The
other company, California Cruisers, has been around for two decades. It is well-
respected in the bicycle industry and remains very popular with riders.
Based on this information, which of the following statements is correct?
O Because of the lower risk of investing in Velocipede, Baylee's potential return with Velocipede
would be higher than with California Cruisers.
O Because of the lower risk of investing in Velocipede, Baylee's potential return with Velocipede
would be lower than with California Cruisers.
O Because of the greater risk of investing in Velocipede, Baylee's potential return with
Velocipede would be higher than with California Cruisers.
O Because of the greater risk of investing in Velocipede, Baylee's potential return with
Velocipede would be lower than with California Cruisers.

In the first place, the is positive relationship between return and risk, a higher return means that a higher risk needs to be taken to earn the above-average return, whereas a lower return means that the risk is lower because the investment is safe, in essence, funds invested are guaranteed to be returned.

In this case, Velocipede , being a new company with no track record of performance to fall back on, is a higher risk company, it needs to stay in business for long to establish itself and earn decent profits, in other words, its returns need to higher to incentivize investors to invest in it.

Overall, the greater the risk, the higher the return demanded by the investors

Find out more about risk-return on:https://brainly.com/question/11541998

#SPJ1