Q810
Type of premium asked by investors for bearing risk on average stock is classified as
A.
average premium
B.
market risk premium
AnswerC.
stock premium
D.
buying discount
Answer: Option B
Solution
Answer: Option B
Solution:
Type of premium asked by investors for bearing risk on average stock is classified as market risk premium. The market risk premium is the difference between the expected return on a market portfolio and the risk-free rate. The market risk premium is equal to the slope of the security market line (SML), a graphical representation of the capital asset pricing model (CAPM).