Question

41. An asset risk premium is given by :
(A) the asset standard deviation
(B) the assets expected returns
(C) expected return per unit of standard deviation
(D) the excess of the assets expected return over the riskless rates​

Answer 1

Answer:

c expected return per unit of standard deviations

Answer 2

Option A is the correct answer i.e., the asset standard deviation.

• An assets risk premium is given by the asset standard deviation.
• The risk premium on an asset is a sort of remuneration for investors.
• It serves as compensation to investors for tolerating greater risk in a particular investment than in a risk-free investment.
• In reality, five different categories of risk premium are present in this situation: business risk, financial risk, liquidity risk, exchange-rate risk, and country-specific risk.
• How far a return on an asset deviates from the average return over a given period is measured by the standard deviation.
• The standard deviation is a frequently used metric of market, fund, and securities volatility.
• A riskier asset with greater price fluctuations is one with a high standard deviation.

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