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Ganezh [65]
3 years ago
13

Last year, T-bills returned 1.8 percent while your investment in large-company stocks earned an average of 5.8 percent. Which on

e of the following terms refers to the difference between these two rates of return?
A. Standard deviation
B. Treasury bills
C. Geometric return
D. Risk premium
E. Inflation rate
Business
1 answer:
Pepsi [2]3 years ago
3 0

Answer:

Option D. Risk premium, is the right answer.

Explanation:

Given the interest or return earned on the T-bill = 1.8 per cent.

The return earned on the investment made in a large company = 5.8 per cent.

Since we know that the difference between the return by the stock market and risk-free return is the risk premium. Below is the formula.

Risk premium = Return from large company (return by the stock market) – return on T bills (risk-free return)

Therefore, the Option D risk premium is correct.

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