Table 12.2 Returns on Investment

question 56

Multiple Choice

Table 12.2
Returns on Investment

-If Table 12.2 represents all the investments available to the economy, the nominal interest rate is 4.5 percent and there is no inflation, what will be the level of investment in the economy?

• A) $200
• B) $500
• C) $600
• D) $800

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Definitions:

Risk-Free Return

The theoretical return on an investment with zero risk of financial loss, often represented by the return on government securities.

Treynor's Measure

A performance metric for determining how well an investment portfolio has compensated the investor for the risk taken, using beta as the risk measure.

Risk-Free Return

The theoretical return on an investment with zero risk, typically represented by government bonds or bills, serving as a benchmark for assessing investment performance.

Information Ratio

This ratio measures the excess return of a portfolio over the benchmark's return, relative to the volatility of those excess returns, indicating the portfolio manager's ability to generate consistent excess returns.