The Risk Premium for an Individual Security Is Equal to the

question 22

Multiple Choice

The risk premium for an individual security is equal to the

• A)beta times the market return
• B)difference between the required return and the risk free rate
• C)weighted average of the individual security betas in a portfolio
• D)the security's covariance divided by the variance of the market

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Definitions:

Yield To Maturity

The total return anticipated on a bond if it is held until it matures, considering all interest payments and the repayment of principal.

Par Value

The face value or nominal value of a bond, share of stock, or other financial instrument, usually representing its value upon issuance.

Total Rate Of Return

The overall amount of profit or loss generated by an investment over a given period, including both capital gains and income, expressed as a percentage of the initial investment.

Zero-Coupon Bond

A debt security that does not pay periodic interest and is sold at a discount from its face value, with its return coming at the bond's maturity.