The addition to expected terminal wealth offered by a risky investment over the certain investment is termed a(n)
A) random variable
B) expected value
C) risk premium
D) certainty equivalent

Question

Quizplus · Accepted Answer

The term "risk premium" specifically refers to the additional return or reward investors expect to receive for taking on riskier investments compared to investments with known, certain outcomes. Random variable and expected value are related to probability and statistics, but do not directly address the concept of risk premium. Certainty equivalent refers to the guaranteed return an investor would accept over an uncertain return.

The Addition to Expected Terminal Wealth Offered by a Risky