The expected return is usually ________ the baseline risk-free rate of return that we demand to compensate for inflation and the time value of money.

Question

Quizplus · Accepted Answer

Investors typically expect to receive a higher return on their investments than the risk-free rate of return in order to compensate for taking on investment risk. This higher return is referred to as the risk premium, which compensates the investor for the possibility of losing money on their investment. Therefore, the expected return is usually higher than the baseline risk-free rate of return.

The Expected Return Is Usually ________ the Baseline Risk-Free Rate