A risk premium
A)is required to get a risk-neutral person to make a fair bet.
B)is the maximum amount needed to compensate a decision-maker to willingly take a risk.
C)is the maximum amount a decision-maker would pay to avoid taking a risk.
D)is the minimum amount a decision-maker would pay to avoid taking a risk.

Question

Quizplus · Accepted Answer

A risk premium is the maximum amount a decision-maker would pay to avoid taking a risk, as it represents the cost of eliminating the uncertainty associated with the risk.

A Risk Premium