How Is a Rate of Return Calculated on the Basis

question 39

Multiple Choice

How is a rate of return calculated on the basis of the risk premium and the risk- free rate?

• A) A premium is subtracted from the risk- free discount rate.
• B) A risk premium is added to the risk- free discount rate.
• C) The risk- free rate is discounted to create a premium.
• D) The premium rate is discounted to minimise risk.

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.