Asked by Alvin P. Davis on Jul 01, 2024
Verified
The market risk premium of an individual security is dependent upon the security's unique risk.
Market Risk Premium
The additional return expected by investors for holding a risky market portfolio instead of risk-free securities.
Unique Risk
The risk specific to an individual asset, such as a stock, which can be mitigated through diversification.
Individual Security
A financial instrument (such as a stock or bond) representing an individual's ownership or creditor relationship with a corporation or governmental entity.
- Apprehend the connection between risk (covering systematic and unsystematic aspects) and the expected return.
Verified Answer
DC
Dessy ChristinaJul 02, 2024
Final Answer :
False
Explanation :
The market risk premium refers to the expected return of the market as a whole over the risk-free rate, and it is not dependent on an individual security's unique risk but rather on the overall market risk.
Learning Objectives
- Apprehend the connection between risk (covering systematic and unsystematic aspects) and the expected return.