The expected return on the market is the risk-free rate plus the ________.
A) diversified returns
B) equilibrium risk premium
C) historical market return
D) unsystematic return

Question

Quizplus · Accepted Answer

The equilibrium risk premium represents the additional return investors demand for holding a risky asset compared to a risk-free asset. It is added to the risk-free rate to determine the expected return on the market. The other choices are not directly related to the calculation of expected market returns.

The Expected Return on the Market Is the Risk-Free Rate