The difference between the opportunity cost of capital for a risky security and a risk-free security is referred to as the:
A)required rate of return.
B)term structure.
C)liquidity premium.
D)risk premium.

Question

Quizplus · Accepted Answer

The difference between the opportunity cost of capital for a risky security and a risk-free security is referred to as the risk premium. The required rate of return refers to the minimum return an investor requires to invest in a security, the term structure refers to the relationship between bond yields and maturities, and the liquidity premium refers to the additional return investors demand for investing in securities that are less liquid. Therefore, the correct choice is D.

The Difference Between the Opportunity Cost of Capital for a Risky