THE RISK PREMIUM AND THE RISK-FREE RATE
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Are you a risk-taker? Some people love to take
risks, but most of us are risk-averse. Sure, we risk-averse people
might take a gamble occasionally, but we certainly expect to be
compensated for that risk. This notion of being compensated for
taking on risk is one of the cornerstones of investment theory.
In this tutorial on risk and risk premiums, you will learn about
the following topics:
- INVESTMENT RISK FACTORS
- Investment Premium for Taking Risk
- THE RISK PREMIUM AND THE RISK-FREE RATE
- SUMMARY OF RISK PREMIUM
Let's get started by identifying some
specific risks in the world of investments.