Not Financial Advice: False, as the greater the risk premium for all stocks, the higher the required rate of return on all stocks.
In theory, the risk-free rate is the minimum return an investor expects for any investment because he will not accept additional risk unless the potential rate of return is greater than the risk-free rate.
In practice, however, the risk-free rate does not exist because even the safest investments carry a very small amount of risk. Thus, the interest rate on a three-month U.S. Treasury bill is often used as the risk-free rate for U.S.-based investors.
While it may be true that in the stock market there is no rule without an exception, there are some principles that are tough to dispute.
Check out these 10 general principles to help investors get a better grasp of how to approach the market from a long-term view shared by Investopedia.com.