The Average Expected Rate of Return of a Financial Asset

question 100

Multiple Choice

The average expected rate of return of a financial asset equals:

• A) the rate that compensates for time preference plus the rate that compensates for risk.
• B) the rate that compensates for time preference plus the rate of inflation.
• C) beta plus the rate that compensates for risk.
• D) the risk-free interest rate plus the rate of inflation.

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Definitions:

Financial Projections

Estimates of future financial performance of a business, including forecasts of income, revenue, expenses, and capital requirements.

External Funding Requirement

The amount of money a company needs to raise from outside sources to finance its activities, investment, and growth.

Growth In Assets

An increase in a company's total assets over a period of time, reflecting expansion and acquisition of new assets for operations or investment purposes.

Current Liabilities

A company's debts or obligations that are due within one year, appearing on the company's balance sheet and including short-term loans, accounts payable, and other similar obligations.