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Risky Solution

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Devangshu Datta BUSINESS STANDARD
Last Updated : Jan 28 2013 | 1:16 AM IST

In classic investment theory, the return from an investment should increase along with the risk. Thus, government debt is considered the safest of investments (even if the government in question is Bihar) and, hence, usually offers the lowest levels of returns. Private debt is considered less safe, and offers higher rates.

Equity in listed companies is considered more risky than private debt and should, in an efficiently functioning system, offer higher returns than most debt. Unlisted equity i.e. venture capital is still riskier and should offer the highest levels of returns.

In general, debt is reckoned to carry less risk than equity and it offers lower returns. Of course, this is an oversimplification. Junk debt

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First Published: Nov 30 2002 | 12:00 AM IST

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