If the real rate of interest is 3.7% and the risk-free rate is 2%, the risk premium is:
A)1.7%.
B)5.7%.
C)3.7%.
D)2%.

Name: If the real rate of interest is 3.7% and the risk-free rate is 2%, the risk premium is: A)1.7%. B)5.7%. C)3.7%. D)2%.
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Question

Quizplus · Accepted Answer

The risk premium is the difference between the real rate of interest and the risk-free rate. 
Risk premium = real rate of interest - risk-free rate 
Risk premium = 3.7% - 2% 
Risk premium = 1.7%

If the Real Rate of Interest Is 3