Do bond interest rate risk premiums only compensate for the amount investors might lose?

What are the three factors that influence the risk and return on an investment?

3 factors affecting investment returns

• #1 Cost of investment. The cost per year of your investment will dictate your return. …
• #2 Asset allocation. Given enough time, investing in the great companies of the world will generally produce a better return than investing in fixed income or cash. …
• #3 Human behaviour. …
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What are the three components of an investors required rate of return on an investment?

The components of an investor’s required rate of return that will compensate her for the risk taken are:

• The time value of money during the investment period.
• The expected rate of inflation during the investment period.
• The risk involved.