Which of These Is the 'Risk Premium

question 2

Multiple Choice

Which of these is the 'risk premium'?

• A)The proportion of return required by an investor on a risky security over and above the market rate of return
• B)The proportion of return required by an investor on a risky security over and above the rate of return on equity
• C)The proportion of return required by an investor on a risky security over and above the risk- free rate of return
• D)The proportion of return required by an investor on a risky security over and above the dividend rate of return

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Definitions:

Depth of Processing

A concept in cognitive psychology that describes how deeply information is thought about or processed, which affects memory retention.

Rhyme

A literary device wherein the ending sounds of words or lines are similar, commonly used in poetry and songs to create rhythm and aesthetic appeal.

Encoding Specificity Principle

A principle stating that the retrieval of information is more effective when the conditions at the time of recall match those present during the initial encoding or learning phase.

Law of Effect

A principle in psychology which states that actions which produce rewards are likely to be repeated, while actions that produce discomfort are less likely to be repeated.