Question

Since the market return represents the expected return on an average stock, the market return reflects a certain amount of risk. As a result, there exists a market risk premium, which is the amount over and above the risk-free rate, that is required to compensate stock investors for assuming an average amount of risk.
A. True
B. False

Answer 1

Answer:

A. True

Explanation:

In the Stock Exchange Market, the market return can be calculated by the expected return on an average stock. This return is a reflection of a certain amount of risk. It gives rise to the existence of a market risk premium, which is the amount over and above the risk-free rate, that is required to compensate stock investors for assuming an average amount of risk.