What Is the Function of Risk Premium

question 158

Multiple Choice

What is the function of risk premium?

• A)To make sure that the value of the bond rises with inflation.
• B)To compensate bondholders for the chance the borrower will not repay the loan.
• C)To distinguish short from long-term bonds.
• D)To raise the return to holding government bonds.

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Definitions:

Mental Energy

The capacity of the mind to engage in cognitive activities and processes, such as thinking, problem-solving, and focusing attention.

Psychoanalytic Thinking

A psychological perspective that emphasizes the influence of the unconscious mind on behavior, originating from the work of Sigmund Freud.

Processing Ability

The capacity of an individual to perceive, analyze, and respond to information in their environment.

Freud

Sigmund Freud was an Austrian neurologist known as the founding father of psychoanalysis, a method for treating psychopathology through dialogue between a patient and a psychoanalyst.