Since the market return represents the expected return on an average stock, the market return reflects a certain amount of risk.As a result, there exists a market risk premium, which is the amount over and above the risk-free rate, that is required to compensate stock investors for assuming an average amount of risk.

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Quizplus · Accepted Answer

This statement is true. The market return is a measure of the expected return on an average stock, and it reflects a certain amount of risk. The market risk premium is the amount that investors require to compensate them for taking on this average level of risk.

Since the Market Return Represents the Expected Return on an Average