The risk premium in the capital asset pricing model rises with the expected return on the market.

Name: The risk premium in the capital asset pricing model rises with the expected return on the market.
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Question

The risk premium in the capital asset pricing model rises with the expected return on the market.​

Quizplus · Accepted Answer

According to the CAPM, the risk premium is the difference between the expected return on a risky asset and the risk-free rate. The risk premium increases when the expected return on the market increases, as investors demand more compensation for taking on additional risk.

The Risk Premium in the Capital Asset Pricing Model Rises