The risk premium a Canadian common stock is commonly calculated as the difference between the stock's rate of return and the __________ ?
A) Canada Savings Bonds Rate of return
B) Prime rate
C) T-bill rate
D) Bank of Canada Rate

Question

Quizplus · Accepted Answer

The risk premium is the additional return an investor expects to receive for taking on risk compared to a risk-free investment. The most commonly used risk-free rate in Canada is the T-bill rate, which is the rate earned on short-term government bonds. Therefore, the risk premium for a Canadian common stock is typically calculated as the difference between the stock's rate of return and the T-bill rate.

The Risk Premium a Canadian Common Stock Is Commonly Calculated