Question

The expected return on a riskless asset is greater than zero due to A. an expected return for delaying consumption. B. irrational investors who believe risk is always present. C. an expected return for opportunity costs. D. an expected return for taxes.

Answer 1

Answer:

A. an expected return for delaying consumption.

Explanation:

When investors has option of a riskless asset, it is assumed that demand for it will be high. So investors rush to take advantage of the opportunity, leading to returns.

For example when one puts his money in the bank, this is considered a riskless asset. He will expect returns for not using his funds immediately ( delayed consumption)