True or False: A higher risk in investment leads to a lower capitalization rate.

In real estate investment, the capitalization rate (or "cap rate") is a metric used to evaluate the return on an investment property. A higher capitalization rate generally indicates a higher perceived risk associated with the investment. This is because investors typically require a higher return for taking on additional risk. Consequently, as the risk increases, the capitalization rate tends to rise, not fall.

In scenarios when an investment is perceived as high risk, investors demand a higher return to compensate for that risk, which naturally results in a higher capitalization rate. Thus, stating that a higher risk leads to a lower capitalization rate is incorrect because it contradicts the fundamental principles of investment return assessment.

Therefore, the assertion is false; a higher risk usually results in a higher (not lower) capitalization rate, which aligns with the expectation of enhanced returns in exchange for bearing additional risk. Understanding this principle is crucial for investors and real estate professionals when assessing property investments and making informed decisions.