The excess return is the difference between the average return on a security and the average return for ________.
A) Treasury bonds
B) a portfolio of securities with similar risk
C) a broad-based market portfolio like the S&P 500 index
D) Treasury bills

Question

Quizplus · Accepted Answer

The excess return is calculated as the difference between the average return on a security and the average return on a risk-free asset, which is typically represented by Treasury bills. Treasury bills are considered risk-free because they are backed by the full faith and credit of the U.S. government, making them a benchmark for calculating excess returns.

The Excess Return Is the Difference Between the Average Return