Question 1 (1 point) Risk premium is the difference between the expected rate of return on a given risky asset and that on a less risky asset. 6 True False Question 2 (1 point) Market risk premium is the additional return over the risk-free rate needed to compensate investors for assuming an average amount of risk. a premium that reflects interest rate risk. the risk that remains in a portfolio after diversification has eliminated all company-specific risk. This risk is also known as nondiversifiable or systematic or beta risk. a a premium equal to expected inflation that investors add to the real risk-free rate of return. F4 F F $ # 3 % 5 8 7 6 2 0 U Y T W E R. H J S F D