Market Risk Premium The difference between the rate of return of a specific asse

ID: 2786920 • Letter: M

Question

Market Risk Premium

The difference between the rate of return of a specific asset and the rate of return of a less risky asset.

Risk-averse investors dislike risk and require higher rates of return as an inducement to buy riskier assets.

The excess return required from an investment in a well-diversified portfolio over that required from a risk-free investment.

None of the above.

The excess return required from an investment in a risky asset over that required from a risk-free investment.

The difference between the rate of return of a specific asset and the rate of return of a less risky asset.

Risk-averse investors dislike risk and require higher rates of return as an inducement to buy riskier assets.

The excess return required from an investment in a well-diversified portfolio over that required from a risk-free investment.

None of the above.

The excess return required from an investment in a risky asset over that required from a risk-free investment.

Market Risk Premium is the excess return required from an investment in a risky asset over that required from a risk-free investment.

Market Risk Premium = beta * (Market return - risk free rate)

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