Which of the following is TRUE of the risk premium?

Question

Quizplus · Accepted Answer

The risk premium varies depending on the credit risk of the investment. Lower-rated corporate issues have a higher risk premium compared to higher-rated corporate issues, as they are considered riskier investments. T-bills have the lowest risk premium since they are backed by the government and considered to be the least risky investment. Government bonds generally have a lower risk premium than corporate bonds, although individual bond issues may differ. Junk bonds typically have a higher risk premium than investment-grade bonds because they are considered to be riskier investments.

Which of the Following Is TRUE of the Risk Premium