Question: Using the concepts from Chapter 6, regarding risk premiums affecting interest rates, explain why stocks would have a higher expected return than US Treasury Bonds.

Using the concepts from Chapter 6, regarding risk premiums affecting interest rates, explain why stocks would have a higher "expected return" than US Treasury Bonds. Another way to explain the differences is by considering why investors would seek higher returns for investing in stocks. Would payment of dividends affect these risks? And why?

Use proper terminology and clear writing to organize your thoughts.

Remember: IP, LRP, MRP, DRP.

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