10
Profitability
Introduction
Imagine that you have come into a lot of money … If you suddenly won five million pounds, how would you choose your investments? You’d naturally want a good return, but I wonder how you feel about risk. Would you be prepared to lose all of your money? I thought not, I didn’t think you’d want to have to go back to work again! You’d probably compare any return you’re offered with the rate that you could get from a building society. For most of us, this would be a ‘risk free rate’ (in as much as anything can be risk free). If you had a lot of money, you could probably find a better risk free rate, but building society interest rates are a reasonable benchmark.
If the risk increased you’d expect the investment ...
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