If a portfolio had a return of 18%, the risk-free asset return was 5%, and the standard deviation of the portfolio's excess returns was 34%, the risk premium would be
A)13%.
B)18%.
C)49%.
D)12%.

Question

Quizplus · Accepted Answer

The risk premium is the extra return achieved above the risk-free rate. Therefore, the risk premium in this case would be:

Risk premium = Portfolio return - Risk-free rate
Risk premium = 18% - 5%
Risk premium = 13%

Therefore, the answer is A - 13%.

If a Portfolio Had a Return of 18%, the Risk-Free