The risk premium is computed by ________ the average rate of return for an investment.
A)subtracting the inflation rate from
B)adding the inflation rate to
C)subtracting the average return on U.S.Treasury bills from
D)adding the average return on U.S.Treasury bills to
E)subtracting the average return on long-term government bonds from

Question

Quizplus · Accepted Answer

The risk premium is the excess return required by an investor to compensate for the risk of the investment. This can be calculated by subtracting the average return on U.S. Treasury bills, which are considered to have no risk, from the average return for the investment being considered.

The Risk Premium Is Computed by ________ the Average Rate