The market risk premium is defined as __________.
A) the difference between the return on an index fund and the return on Treasury bills
B) the difference between the return on a small firm mutual fund and the return on the Standard and Poor's 500 index
C) the difference between the return on the risky asset with the lowest returns and the return on Treasury bills
D) the difference between the return on the highest yielding asset and the lowest yielding asset

Question

Quizplus · Accepted Answer

The market risk premium is defined as the difference between the return on an index fund and the return on Treasury bills. It represents the additional return investors require for taking on the risk of investing in the stock market compared to the risk-free rate offered by Treasury bills.

The Market Risk Premium Is Defined as __________