Assume that the following relationship holds in the bond market: (1+R(0,3))=(1+R(0,1)+L)(1+E[R(1,2)]+L)(1+E[R(2,3)]+L) If investors are risk averse, which of the following is true?

Question 5 options:

	All the risk premiums must be zero.
	If investors are risk averse, they will not want to hold a risky risk bond
	At least some risk premium L must be positive
	Investors only care about risk and thus the risk premiums L can be any value, either positive or negetive