๐ What is "Risk Premium" in an Article?
Risk premium refers to the extra return an investor expects to receive for taking on a higher level of risk compared to a "risk-free" investment (like government bonds).
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๐ง In Simple Terms:
> It's the reward for taking a risk.
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๐ Example in Articles:
When an article talks about the risk premium, it might be discussing:
Why investors demand more returns when buying risky assets (like crypto, stocks).
How changes in market conditions, like inflation or political events, can increase or decrease this premium.
Why some countries or companies have higher borrowing costs due to perceived risk.
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๐ก Formula (Basic Idea):
> Risk Premium = Expected Return โ Risk-Free Rate
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If you'd like, I can break down a specific article's use of the term โ just share the text or link!