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Risk premium.

Risk premium is the additional premium which is given to the investors to take risk than non-risky return .

According to Besley and Brigham,” The portion of the expected return that can be attributed to the additional risk of an investment; it is the difference between the expected rate of return on a given risky asset and that on a less risky asset.”

According to Ross, Westerfield and Jordan,” The excess return required from an investment in a riskly assets over that required from a risk free investment.”

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