The excess return earned by an asset that has a beta of 1.34 over that earned by a risk-free asset is referred to as the:
A) market risk premium.
B) risk premium.
C) systematic return.
D) total return.
E) real rate of return.

Question

Quizplus · Accepted Answer

The excess return earned by an asset over and above the risk-free rate is referred to as the risk premium. In this case, the excess return earned by an asset with a beta of 1.34 is the risk premium. The market risk premium is the excess return earned by the market over and above the risk-free rate, and systematic return refers to the component of return that is attributed to market risk. Total return is the overall return earned by an asset, and the real rate of return is the return adjusted for inflation.

The Excess Return Earned by an Asset That Has a Beta