The Market Has an Expected Rate of Return of 9

question 341

Multiple Choice

The market has an expected rate of return of 9.8%. Long-term government bonds are expected to yield 4.5% and Treasury bills are expected to yield 3.4%. The inflation rate is 3.1%. What is the market risk premium?

• A) 2.2%
• B) 3.3%
• C) 5.3%
• D) 6.4%
• E) 6.7%

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Definitions:

Productivity

The efficiency with which inputs, such as labor and capital, are converted into outputs, or goods and services.

Dry-Landscape Gardens

A style of Japanese garden that uses sand, gravel, rocks, and occasionally plants to create a minimalist and contemplative environment.

Momoyama

A period in Japanese history (1573–1603), characterized by a unique style of art and architecture that emerged during the transition from feudal Japan to the unified Edo period.

Nara

A city in Japan known for its historic temples and artwork from the Japanese Nara period (710-794).