Which One of the Following Is a Correct Statement Concerning

question 44

Multiple Choice

Which one of the following is a correct statement concerning risk premium?

• A) The greater the volatility of returns, the greater the risk premium.
• B) The lower the volatility of returns, the greater the risk premium.
• C) The lower the average rate of return, the greater the risk premium.
• D) The risk premium is not correlated to the average rate of return.
• E) The risk premium is not affected by the volatility of returns.

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Definitions:

Dividends Payable

A liability account on a company's balance sheet representing the amount owed to shareholders from declared dividends not yet paid.

Par Common Stock

Par Common Stock refers to the nominal or face value assigned to common stock shares by the issuing company.

Noncumulative Preferred Stock

A type of preferred stock where dividends not paid in one period do not accumulate or have to be paid in future periods.

Noncumulative Preferred Stock

A type of preferred stock where missed dividend payments are not required to be paid to the shareholders in the future.