which one of the following is the computation of the risk premium for an individ
ID: 2646360 • Letter: W
Question
which one of the following is the computation of the risk premium for an individual security?E(R) is the expected return on the security,Rf is the risk-free rate, B is the security's beta, and E(Rm) is the expected rate of return on the market. A. E(Rm)-Rf. B. E(R)-E(Rm). C. E(R)-[E(Rm)+Rf]. D. B[E(Rm)-Rf]. E. B[E(R)-Rf]Which one of the following is the computation of the risk premium for an individual security? E(R) is the expected return on the security. Rf is the risk-free rate, beta is the securitys beta, and E(RM) is the expected rate of return on the market. E(RM) - Rf E(R) - E(RM) E(R) - [(E(RM) + Rf] beta [E(RM) - Rf] beta [E(R) - Rf] Winch one of the following is the best example of unsystematic risk? Inflation exceeding market expectations A warehouse lire
Explanation / Answer
Option D is the correct answer: B[E(Rm)-Rf]
The risk premium is beta times the difference between the market return and a risk free return. In the capital asset pricing model formula, by subtracting the market return from a risk free return, the risk of the overall market can then be determined. By multiplying beta times this risk of the market, the risk of the individual stock can then be determined
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.