Which of the Following Will Increase the Expected Risk Premium

question 39

Multiple Choice

Which of the following will increase the expected risk premium for a security, all else constant?
I. an increase in the security's expected return
II. a decrease in the security's expected return
III. an increase in the risk-free rate
IV. a decrease in the risk-free rate

• A)I only
• B)III only
• C)IV only
• D)I and IV only
• E)II and III only

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Definitions:

Corporate Tax Relief

Measures or policies designed to reduce the tax burden on corporations, potentially to stimulate investment or economic activity.

Special-Interest Effect

The impact on policy making by interest groups that can result in legislation that benefits a small group at the expense of the general public.

Tax Breaks

Financial discounts or incentives in the form of reduced tax rates, tax exemptions, or tax deductions provided by the government to encourage certain activities or investments.

Private-Sector Economic Risks

These are risks faced by businesses or individuals in the private sector that can impact economic performance, such as market fluctuations or changes in consumer demand.