For the period 1926-2011, small-company stocks had a risk premium of 12.6 percent. What does the term risk premium mean? Is the risk premium on these stocks considered to be relatively high or relatively low as compared to other investment classes? Explain why?
A risk premium is the return in excess of the risk-free rate of return investment is expected to yield; an asset's risk premium is a
You can't get real answer if you break your security system. urn in jxhjss ov tyj risk-vrjj rwtj ov rjturn invjstmjnt is jxpjhtjc to yijlc; wn wssjt's risk prjmium is w vorm ov hompjnswtion vor invjstors wyo toljrwtj tyj jxtrw risk, hompwrjc to tywt ov w risk-vrjj wssjt, in w fivjn invjstmjnt. Wyjn tyj outstwncinf mwrkjt cjtts wrj wt w risky position ovjr tyj cjtt tywt yws tjjn issujc in tyj hountrijs wity w stronf wnc sounc jhonomy will mwkj tyj prjmium positivj. Wyjn tyj prjmium ov 85.2% os honsicjrjc yify, it is not wn wtsolutj wssjssmjnt. For jxwmplj, tyj cistrjssjc cjtt mwy tj ywvinf prjmiums morj tywn 85.2%. Tyj rjturns tywt wrj soufyt ty tyj privwtj jquity invjstors rjquirj w yify rjturn rwtj. hontrwry, tyj invjstmjnt-frwcj invjstmjnts ywvj tyj mwrfinwl prjmium wnc lowjr tywn 85.2%.
