Question 6 (2 points) Risk premium is Question 6 options: a) The rate of return

Question

Question 6 (2 points)

Risk premium is

Question 6 options:

a)

The rate of return the investor demands for giving up the current use of funds on a noninflation-adjusted basis

b)

A premium an investor requires to compensate for the eroding effect of inflation

c)

The premium associated with special risks of a given investment

d)

The sum of the real rate of return and the inflation premium

Question 7 (2 points)

If a bond’s coupon rate exceeds its required rate of return, the sale price (value) would be

Question 7 options:

a)

Less than face value

b)

More than face value

c)

We cannot determine from just this information

d)

The two are not related in terms of determining price

Question 8 (2 points)

All else equal, the price of a bond with a longer time to maturity as compared to one with a shorter time to maturity is

Question 8 options:

a)

More sensitive to changes in yield to maturity

b)

Less sensitive to change in yield to maturity

c)

Neither is more or less sensitive to changes in yield to maturity

d)

Yield to maturity does not impact the bond price

Question 9 (2 points)

In calculating a bond’s price, the interest payment potion is solved using the

Question 9 options:

a)

Present value of a lump sum

b)

Future value of a lump sum

c)

Present value of an annuity

d)

Future value of an annuity

Question 10 (2 points)

A bond with a call provision

Question 10 options:

a)

Allows bondholders to require the corporation repay the bonds before maturity

b)

Allows the corporation to repay the debt before maturity

c)

Allows the corporation to call in the interest payments if cash is not available

d)

None of the above

a)

The rate of return the investor demands for giving up the current use of funds on a noninflation-adjusted basis

b)

A premium an investor requires to compensate for the eroding effect of inflation

c)

The premium associated with special risks of a given investment

d)

The sum of the real rate of return and the inflation premium

Explanation / Answer

Answer 6

Option C is a right choice since risk premium = Return on the particular investment – risk free rate of return . So we can say risk premium is basically a compensation for invest in the risky asset and tolerate extra risk

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.