As a fundamental economic principle, there is typically a fair trade-off between risk and return. In the investment world, where risks are taken on various asset classes, risk premia are the returns received above the risk-free rate earned in exchange for taking that risk. Where there are sufficient buyers and sellers of assets/securities, the market is assumed to generally be efficient, with an appropriate level of reward for a commensurate level of risk. For example, a company's bonds pay a lower expected return than the same company's equity because bondholders are paid first in a liquidation, and thus, equity has higher risk. Therefore, the equity will have a higher return to fairly compensate for the higher risk.