The risk premium of an asset is defined as the return on the asset in excess of the:
A) Current market rate of return.
B) Rate of inflation.
C) Risk-free rate of return.
D) Average return on the asset.
E) Average market rate of return.

Question

Quizplus · Accepted Answer

The risk premium of an asset is defined as the return on the asset in excess of the risk-free rate of return. This represents the extra return investors demand for taking on the additional risk of the asset compared to a risk-free investment.

The Risk Premium of an Asset Is Defined as the Return