Many financial managers use market risk premiums that are closer to 5%, which is lower than historical averages, because investors require a ________ risk premium for holding risky securities than in the past.

Question

Quizplus · Accepted Answer

Financial managers use lower market risk premiums because investors require a lower risk premium for holding risky securities than in the past. This reflects a change in investor risk tolerance or market conditions that allow for lower compensation for risk.

Many Financial Managers Use Market Risk Premiums That Are Closer