Question 7 (2 points)

Which of the following statements is/are TRUE about the market risk premium?

I. As investors become less risk averse, the market risk premium is expected to increase

II. Arithmetic average should be used to measure the risk premium for long-term horizons

III. The implied risk premium approach uses information imbedded in stock prices to derive the risk premium

IV. The survey approach could lead to unreasonable estimates of the market risk premium

Question 7 options:

I only

III and IV only

II only

III only