Generally, market risk premiums go up when
A) the average asset in the market becomes less risky.
B) the threat of terrorism goes down.
C) investors develop confidence in the market.
D) none of the above.

Question

Quizplus · Accepted Answer

Market risk premiums are the additional return that investors require for holding market investments over risk-free investments such as government bonds. They represent the compensation for the risk of investing in the market, which includes factors such as economic uncertainty, geopolitical risks, and company-specific risks. Market risk premiums are not affected by changes in the average risk of assets in the market, the threat of terrorism, or investors' confidence in the market. Therefore, none of the options A, B, and C are correct. The correct answer is D.

Generally, Market Risk Premiums Go Up When