The market risk premium remains constant over time because the risk-free rate of return moves inversely with beta.

Question

Quizplus · Accepted Answer

The statement is not true. The market risk premium is the difference between the expected return on the market and the risk-free rate of return, and it can vary over time depending on market conditions and investor sentiment. Beta, on the other hand, measures the systematic risk of a particular investment relative to the market, and does not have a direct influence on the market risk premium.

The Market Risk Premium Remains Constant Over Time Because the Risk-Free