Which of the following statements concerning the equity risk premium is true?
A)Some scholars think it is too low
B)There is no direct way to measure it
C)It predicts high future returns on stocks
D)It is expected to increase in the future

Question

Quizplus · Accepted Answer

There is no direct way to measure the equity risk premium as it is a theoretical concept that cannot be observed directly. Option A is incorrect as some scholars may argue that the equity risk premium is too high, not too low. Option C is incorrect as the equity risk premium does not predict future returns on stocks but rather represents the additional return that investors demand for holding stocks compared to risk-free assets. Option D is also incorrect as the equity risk premium may increase or decrease in the future depending on various factors such as economic conditions and investor sentiment.

Which of the Following Statements Concerning the Equity Risk Premium