Question

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

a. The greater the volatility of returns, the less 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. None of the above

Answer 1

The correct answer is option e i.e. None of the above. Since the correct statement concerning risk premium is the greater the volatility of returns, the greater the risk premium

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