Asked by Shariar Mohammed on Apr 28, 2024
Verified
The added return an investor needs to compensate for the risks of future payments is called a(n)
A) present discounted value.
B) marginal risk product.
C) internal rate of return.
D) risk premium.
Risk Premium
A risk premium is the added return an investor needs to compensate for the risks of future payments.
Future Payments
Obligations or amounts of money that are required to be paid at a future date, often relating to loans, financing arrangements, or deferred payment agreements.
- Acknowledge the impact of risk and uncertainty when making investment decisions and consider the importance of a risk premium.
Verified Answer
ZJ
Zainab JasimApr 30, 2024
Final Answer :
D
Explanation :
The risk premium is the added return an investor requires to compensate for the risk associated with future payments, reflecting the additional compensation needed over a risk-free rate.
Learning Objectives
- Acknowledge the impact of risk and uncertainty when making investment decisions and consider the importance of a risk premium.