Investors require a 3 percent return on risk-free investments. on a particular risky investment, investors require an excess return of 7 percent in addition to the risk-free rate of 3 percent. what is this excess return called?
1) required return
2) average return
3) real return
4) risk premium
5) inflation premium

Stock a has a beta of 1.2 and a standard deviation of 20%. stock b has a beta of 0.8 and a standard deviation of 25%. portfolio p has $200,000 consisting of $100,000 invested in stock a and $100,000 in stock b. which of the following statements is correct? (assume that the stocks are in equilibrium.) (a) stock b has a higher required rate of return than stock a. (b) portfolio p has a standard deviation of 22.5%. (c) portfolio p has a beta equal to 1.0. (d) more information is needed to determine the portfolio's beta. (e) stock a's returns are less highly correlated with the returns on most other stocks than are b's returns.