Correct Answer:
C. Its returns are uncertain
An investment is considered risky when there is uncertainty regarding its future returns. This means that the actual returns an investor receives may differ significantly from what was expected, potentially leading to lower-than-anticipated gains or even losses. Risk, in finance, quantifies this unpredictability.
- C: Its returns are uncertain is the correct answer because it directly defines investment risk. The core of financial risk is the variability and unpredictability of an investment's future performance.
- A: It is dangerous is too vague and not a precise financial definition. While some risky investments might feel dangerous, the term 'uncertainty of returns' is the accurate financial descriptor.
- B: It has low returns is incorrect. An investment can have low returns but still be very safe (e.g., a savings account with guaranteed, albeit low, interest). Risk is about the *variability* of returns, not their absolute level.
- D: Its raw material is unavailable describes an operational or supply chain risk for a company, which can indirectly affect investment returns, but it is not the fundamental definition of investment risk itself for an investor.