Question: 4. The excess return you earn by moving from a relatively risk-free investment to a risky investment is called the A) geometric average return. B)

4. The excess return you earn by moving from a relatively risk-free investment to a risky investment is called the A) geometric average return. B) inflation premium. C) risk premium. D) time premium. E) arithmetic average return.

5. Over the long-term, which one of the following is a correct statement concerning risk premium? A) The lower the volatility of returns, the greater the risk premium. B) Stocks tend to have a higher risk premium than bonds. C) The lower the rate of return, the greater the risk premium. D) The risk premium does not affect the rate of return. E) The risk premium varies by the same percentage rate as the inflation rate.

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