A risk premium is the amount of interest you might receive over and above the risk-free return insured by the federal government.

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A risk premium refers to the additional return an investor expects to receive from an investment that carries a higher level of risk compared to a risk-free asset. The risk-free return is typically represented by government bonds, which are considered safe investments. The risk premium compensates investors for taking on the additional risk.

A Risk Premium Is the Amount of Interest You Might