Risk Premium

Risk Premium is the return in excess of the risk-free rate of return that an investment is expected to yield. 

Risk Premium

Risk Premium is the return in excess of the risk-free rate of return that an investment is expected to yield. 

 


Explanation of Risk Premium

An asset's risk premium is a form of compensation for investors willing to tolerate the extra risk. Risky investments must provide an investor with the potential for larger returns to warrant the risks of the investment. 


Related Terms