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If william earns a 10 percent return and kate earns a 7 percent return on investments with the same risk, the additional 3 percent return on william's investment is a(n) _____.
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If william earns a 10 percent return and kate earns a 7 percent return on investments with the same risk, the additional 3 percent return on william's investment is a(n) _____.

User Bennett Adams
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Final answer:

The additional 3 percent return that William earns over Kate's return on an investment with the same risk is known as a premium, reflecting the difference in earnings.

Step-by-step explanation:

If William earns a 10 percent return and Kate earns a 7 percent return on investments with the same risk, the additional 3 percent return on William's investment is referred to as a premium. This premium represents the extra earnings William is receiving for his investment compared to Kate's investment.

The concept of returns on investment is crucial in the financial world and affects decisions regarding where and how to invest money. The power of compound interest highlights the importance of these returns in accumulating wealth over time. For example, investing early and letting an investment grow through compound interest can result in significant expansion of the initial sum, as shown in the example where $3,000 grows to $44,923 over 40 years at a 7% annual rate.

User Vikash Pareek
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