Q822
An additional desired compensation by investors for assuming an additional risk on investment is classified as
A.
risk premium
AnswerB.
investor premium
C.
additional premium
D.
assumed premium
Answer: Option A
Solution
Answer: Option A
Solution:
An additional desired compensation by investors for assuming an additional risk on investment is classified as risk premium. A risk premium is the return in excess of the risk-free rate of return an investment is expected to yield; an asset's risk premium is a form of compensation for investors who tolerate the extra risk, compared to that of a risk-free asset, in a given investment.