Many financial managers use market risk premiums that are closer to 5%, which is lower than historical averages, because ________
A) the return investors require as compensation for taking on the risk of investing in equity markets has diminished over a period of time
B) investors require a higher risk premium for holding risky securities than in the past
C) investors require a supernormal risk premium for holding risky securities as compared with the past
D) investors require the same premium for holding risky securities as in the past
Answer: A
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