The risk premium is equal to the required yield to maturity (or rate of return) minus both the real rate of return and the inflation premium.

Question

Quizplus · Accepted Answer

This is an accurate definition of the risk premium. It represents the additional return investors demand to compensate for the risk of holding a particular security or asset, and is calculated as the difference between the required rate of return and the sum of the real rate of return (the return adjusted for inflation) and the inflation premium (the compensation investors require for the expected inflation rate).

The Risk Premium Is Equal to the Required Yield to Maturity