Question

The market risk premium is defined as __________. A. the difference between the return on an index fund and the return on Treasury bills B. the difference between the return on a small-firm mutual fund and the return on the Standard

Answer 1

Answer:

A. the difference between the return on an index fund and the return on Treasury bills.

Explanation:

This term can be primarily used in denoting of opportunity cost in an investment, and also for risk assessment.

It is primarily defined to be the difference between an expected return on a market investment against the risk free rate. When a graph is been put to consideration, the market risk premium equals the security market line.

It is also primarily known also for its provision of quantitative measure found in the extra return demanded by market participants for the increased risk. At this summation, it is denoted that it is the difference between the return on an index fund and the return on Treasury bills.