Over the long-term, the greater the volatility in the returns on a risky security the:
A) Lower the average total return.
B) Greater the average risk premium.
C) Greater the risk-free rate of return.
D) Lower the average risk premium.
E) Lower the average capital gains yield.

Question

Quizplus · Accepted Answer

Greater volatility in the returns on a risky security typically demands a higher average risk premium. Investors require additional compensation for bearing the increased risk associated with higher volatility.

Over the Long-Term, the Greater the Volatility in the Returns