Risk premium is the additional return that investors require for taking on additional risk in their investments. This compensation is meant to reflect the potential for losses associated with investing in securities that are deemed more risky than others. Therefore, choice A is the correct statement.

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Risk Premium Is

Question 30

Multiple Choice

Risk premium is:

A) A payment differential necessary to compensate the investor for having to bear a risk
B) The additional payment paid by bonds issued by the federal government
C) The tendency of some investors to incur in high risk
D) The benefits of buying from a trustworthy institution

Correct Answer: