The difference between the expected rate of return on a given risky asset and the expected rate of return on a less risky asset is known as the _____.
A)standard deviation of returns
B)variance of returns
C)actual rate of return
D)risk premium
E)risk-adjusted return

Question

The difference between the expected rate of return on a given risky asset and the expected rate of return on a less risky asset is known as the _____. 
A)standard deviation of returns
B)variance of returns
C)actual rate of return
D)risk premium
E)risk-adjusted return

Quizplus · Accepted Answer

The difference between the expected rate of return on a risky asset and a less risky asset is commonly referred to as the risk premium. It is the compensation a risk-averse investor would demand for bearing the risk of a particular investment. Therefore, the correct option is D.

The Difference Between the Expected Rate of Return on a Given