Use the table for the question(s)below.
Consider the following average annual returns:

-What is the risk premium for corporate bonds?
A)2.7%
B)1.3%
C)-5.7%
D)0%
E)8.4%

Question

Use the table for the question(s)below.
Consider the following average annual returns:
 
-What is the risk premium for corporate bonds?
A)2.7% 
B)1.3% 
C)-5.7% 
D)0% 
E)8.4%

Quizplus · Accepted Answer

The risk premium is calculated as the average return of the asset minus the risk-free rate. In this case, the average return for corporate bonds is 6.3% and the risk-free rate is 3.6%, so the risk premium is 6.3% - 3.6% = 2.7%.

Use the Table for the Question(s)below