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When would I use the arithmetic average risk premium (as opposed to the geometric risk premium)?
Step by step
Solved in 4 steps
- Explain Comparing Risk Premiums?What is definitions of this? Systematic risk Risk free rate of return Market rate of return, and Risk premium.Which one of the following statements is correct? Group of answer choices The lower the average return, the greater the risk premium. The greater the volatility of returns, the greater the risk premium. The lower the volatility of returns, the greater the risk premium. The risk premium is not affected by the volatility of returns. The risk premium is unrelated to the average rate of return.
- Beta is which of the following: A) standard deviation. B) total risk. C) Beta is the relationship which is between an investment's return, and the market return. D) unsystematic risk.Define the real risk-free rate (r*). What security canbe used as an estimate of r*? What is the nominalrisk-free rate (rRF)? What securities can be used asestimates of rRF?How does standard deviation and variance affect portfolio risk, more so than expected return?
- Which of the following statements is true for compensation of risk? a. Higher the risk, lower is the return b. Lower the risk, higher is the return c. Higher the risk, higher is the return d. Higher the risk, zero is the returnwhat does Market's Risk premium measureWhat is a risk measure? a Alpha b Required return on the market portfolio c Standard deviation of historical returns