Essay Assignment

We know that risk premium is the extra reward that investors want for taking a higher risk; a very famous equation in finance is the equality of risk and return. If you invest in risk free assets such as treasury bills, you get prevailing interest rate, so treasury bills have the smallest risk premium, then number 2 is government bonds, they are riskier than treasury, then number 3 is corporate bonds, AAA rating, number 4, other corporate bonds, and number 5 is stocks in the equity market.

Assume that you have $10,000 that you want to invest, you have 5 different category of assets that are ranked per their risk premium, which one you chose, have in mind that higher risk goes with higher rewards