1. Market Risk Premium
The difference between the rate of return of a specific asset and the rate of return of a less risky asset.
Risk-averse investors dislike risk and require higher rates of return as an inducement to buy riskier assets.
The excess return required from an investment in a well-diversified portfolio over that required from a risk-free investment.
None of the above.
The excess return required from an investment in a risky asset over that required from a risk-free investment.
2. How much are you willing to pay for a 6% annual coupon bond with a 4% yield, which comes due in 12 years?
$1,187.70
$2,502.58
$674.80
None of these
$832.32