The Risk Premium Is Defined as the Rate of Return

question 44

Multiple Choice

The risk premium is defined as the rate of return on:

• A)a risky asset minus the risk-free rate.
• B)the overall market.
• C)a U.S. Treasury bill.
• D)a risky asset minus the inflation rate.
• E)a riskless investment.

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Definitions:

Independent Variables

Variables that are manipulated or categorized to determine their effect on other variables.

Quantity Minimized

Refers to the outcome of an optimization problem where the goal is to find the smallest possible value of a certain quantity.

Multiple Regression Model

A statistical technique that models the relationship between a dependent variable and multiple independent variables by fitting a linear equation to observed data.

Regression Slope Coefficients

The estimates that measure the relationship between the dependent variable and each independent variable in regression analysis.