Answer:
D
Explanation:
Risk premium is the compensation given to investors for holding risky assets. The more risky an asset is, the higher the premium.
A rational investor would be unwilling to invest in a stock that offers zero premium because there is no compensation for the risk that is borne by the investor.
Risk premium is always positive.
Risk premium = expected rate of return of the asset - expected rate of return of the risk free asset.
The more risky the asset, the higher the expected rate of return. So, the expected rate of return of the asset would always be higher than the risk free rate. This makes risk premium positive
