The extra compensation paid to an investor who invests in a risky asset rather than in a risk-free asset is called the
A) Inefficient premium
B) Diversification benefit
C) Expected return
D) Portfolio adjustment
E) Risk premium

Question

Quizplus · Accepted Answer

The extra compensation paid to an investor for taking on the risk of investing in a risky asset rather than a risk-free asset is called the risk premium. It is the amount of additional return that an investor expects to earn as compensation for the risk of losing money on the investment. This risk premium is an important factor that investors consider when making investment decisions.

The Extra Compensation Paid to an Investor Who Invests in a Risky