The required rate of return on the Daisy Corporation's common stock is 11%, the current real rate of return in the market is 1%, and the market's risk-free rate of return is 4%.In this case, the risk premium associated with Daisy's stock is
A) 5%.
B) 6%.
C) 7%.
D) 8%.

Question

Quizplus · Accepted Answer

The risk premium is the difference between the required rate of return and the risk-free rate of return. 
Risk premium = Required rate of return - Risk-free rate of return 
= 11% - 4% 
= 7% 
Therefore, the answer is C) 7%.

The Required Rate of Return on the Daisy Corporation's Common