The Annual Return on the S&P 500 Index Was 12

question 1

Multiple Choice

The annual return on the S&P 500 Index was 12.4 percent. The annual T-bill yield during the same period was 5.7 percent. What was the market risk premium during that year?

• A) 5.7 percent
• B) 6.7 percent
• C) 12.4 percent
• D) 18.1 percent

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Definitions:

Depreciation

A financial approach that spreads the price of a tangible asset over the period it is expected to benefit the company.

Annual Fixed Costs

The total of all business expenses that are consistent and unchanged throughout the fiscal year, regardless of production levels or sales volume.

Contribution Margin

The contribution margin represents the portion of sales revenue that is not consumed by variable costs and contributes to covering the company's fixed costs.

Depreciation Expense

A technique in accounting for distributing the expense of a physical asset across its usable life.