An investment in common stock carries a higher return than a bank certificate of deposit.The difference in returns is called

Question

Quizplus · Accepted Answer

The difference in returns between an investment in common stock and a bank certificate of deposit is called the risk premium. This is the additional return that an investor demands for taking on additional risk in the stock market. The risk-free rate refers to the rate of return on a risk-free investment, such as a Treasury bond. The real rate of return is the rate of return on an investment adjusted for inflation. Beta is a measure of the volatility of a stock relative to the overall market. Therefore, the correct answer is C, the risk premium.

An Investment in Common Stock Carries a Higher Return Than