Why do investors sometimes demand risk premiums when investing?
What will be an ideal response?
Answer: The typical investor is risk averse which means they don't like to take risks with their important money like retirement savings. The problem is that conservative, low risk investments typically do not provide a high enough real return to allow these risk averse investors to reach their goals. In order to motivate these investors to assume a higher level of risk, then there must be a higher potential return available. The various risk premiums increase the potential nominal returns providing motivation for investors to assume higher risks. Without these risk premiums no one would be willing to assume the risks inherent with entrepreneurial activities severely limiting access to financial capital needed for business investment.
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The coefficient of determination resulting from a particular regression analysis was 0.85. What was the slope of the regression line?
A) 0.85 B) -0.85 C) 0.922 D) There is insufficient information to answer the question. E) None of the above
Representative participation is characterized by ________
A) joint decision making by employees and management B) democratic leadership behaviors C) open and honest two-way communication D) a significant positive impact on employee morale and performance E) compliance with the legal need to redistribute power within organizations