The excess return is the ________.
A)rate of return that can be earned with certainty
B)rate of return in excess of the Treasury bond rate
C)rate of return to risk aversion
D)index return

Question

Quizplus · Accepted Answer

The excess return is the rate of return in excess of the Treasury bond rate. This represents the additional compensation an investor receives for taking on additional risk beyond investing in a risk-free asset like Treasury bonds. Option A is incorrect because there is no rate of return that can be earned with certainty in the market. Option C is incorrect because the excess return is not directly related to an investor's risk aversion, but rather reflects the additional compensation for taking on additional risk. Option D is incorrect because the index return represents the return earned by a market index, and is not necessarily related to excess return.

The Excess Return Is the ________