The excess return earned by a risky asset,for example with a beta of 1.4,over that earned by a risk-free asset is referred to as a:
A) market risk premium.
B) risk premium.
C) systematic return.
D) total return.
E) real rate of return.

Question

Quizplus · Accepted Answer

The excess return earned by a risky asset over that earned by a risk-free asset is referred to as a risk premium. The market risk premium refers to the excess return earned by the market as a whole over the risk-free rate. Systematic return is the portion of the total return that is related to the overall market or systematic risk factors, and not company-specific factors. Total return includes both the risk premium and the risk-free rate. The real rate of return is the return earned after accounting for inflation.

The Excess Return Earned by a Risky Asset,for Example with a Beta