The difference between the risk-free and risky interest rate is the:
A)rate of inflation.
B)depreciation rate.
C)zero.
D)risk premium.

Question

Quizplus · Accepted Answer

The risk premium is the additional return that investors expect to receive for taking on additional risk, above and beyond the risk-free interest rate. Therefore, the difference between the risky interest rate and the risk-free interest rate represents the risk premium.

The Difference Between the Risk-Free and Risky Interest Rate Is