You Own Three Securities

Multiple Choice

You own three securities. Security A has an expected return of 11% as compared to 14% for Security B and 9% for Security C. The expected inflation rate is 4% and the nominal risk-free rate is 5%. Which one of the following statements is correct?

A) There is no risk premium on Security C.
B) The risk premium on Security A exceeds that of Security B.
C) Security B has a risk premium that is 50% greater than Security A's risk premium.
D) The risk premium on Security C is 5%.
E) All three securities have the same expected risk premium.