A Risk Premium Is

question 3

Multiple Choice

A risk premium is

• A) a measure calculated to reflect the riskiness of future profits.
• B) subtracted from the discount rate when calculating the present value of a future stream of risky profits.
• C) lower the more risky the future stream of profits.
• D) an additional compensation paid to the workers of a business enterprise.

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Definitions:

Price Volatility

The degree of variation in the price of a financial instrument over a certain period of time, indicating the level of risk associated with it.

Store Value

Store value refers to the inherent worth a product or service offers to customers, often influencing their purchase decisions.

Fund Returns

Fund Returns are the profits or losses from investments in mutual funds, ETFs, or other pooled investment vehicles, typically presented as a percentage gain or loss over a specific period.

Sharpe Measure

A financial metric used to assess the performance of an investment by adjusting for its risk.