Risk-return spectrum
Understand why the risk premium: rational investors only accept higher risk if compensated by higher expected return.
In this lesson
Risk-return spectrum is part of Investing Foundations. This preview shows how investment-universe connects to everyday family decisions such as earning, saving, spending choices, goals, approvals, or parent-guided money conversations inside Progress Penguin.
Today’s money mission
Imagine this situation: Rank from lowest to highest expected return (and risk): local T-bills, FGN bonds, NGX stocks, cryptocurrency.
What you need to know
The risk premium: rational investors only accept higher risk if compensated by higher expected return. This is why T-bills (near-zero risk) offer lower returns than stocks. The expected return differential IS the risk premium — investors are being paid to accept uncertainty.
Real-life example
Real-life money moment: Rank from lowest to highest expected return (and risk): local T-bills, FGN bonds, NGX stocks, cryptocurrency. The key lesson is: The risk-return spectrum: T-bills (government, short-term, near-certain) → FGN Bonds (government, longer-term, slightly more rate risk) → NGX Stocks (company equity, volatile, higher long-term return) → Crypto (extreme volatility, potential for large gains or total loss).
Progress Penguin connection
Open the investment simulator and line up four asset types: cash, FGN bonds, balanced mutual fund, and NGX equities. Enter realistic long-term return rates and risk levels for each. The risk-return spectrum is the pattern you see across those four entries.
Activity preview
Try the money challenge
Run the investment model and test: the risk premium: rational investors only accept higher risk if compensated by higher. Adjust one variable — time, rate, or amount — and note which has the biggest effect on the final balance.
Try one real money action
Open Tasks and submit proof for one task, or open Requests and make a deposit request. Parent approval can happen later.
Quiz preview
Higher potential returns usually come with:
Rank from lowest to highest expected return (and risk): local T-bills, FGN bonds, NGX stocks, cryptocurrency.