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Your friend Bob took a finance class and learned about the risk-return trade-off. Wanting a high return, Bob invested in a risky, start-up technology company.

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

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