Your Friend Ricky Took a Finance Class and Learned About

Essay

Your friend Ricky took a finance class and learned about the risk-return trade-off.Wanting a high return,Ricky invested in a risky,start-up technology company.A year later the company went bankrupt and Ricky lost his entire investment.Ricky is furious with his finance professor for misleading him,claiming he was taught that higher return goes with higher risk.Explain how Ricky misinterpreted the risk-return trade-off.