Because the market return represents the return on an average stock,that return carries risk with it.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 an investor for assuming an average amount of risk.

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Quizplus · Accepted Answer

This statement is true. The market return carries risk, which means investors require an additional compensation beyond the risk-free rate for assuming an average level of risk. This additional compensation is known as the market risk premium.

Because the Market Return Represents the Return on an Average