The Market Has an Expected Rate of Return of 9

question 30

Multiple Choice

The market has an expected rate of return of 9.8%.The long-term government bond is 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%

---

Definitions:

Cost-to-Retail Ratio

The cost-to-retail ratio is a calculation used in inventory management to estimate the value of ending inventory at retail prices by considering the cost and retail value of goods available for sale.

Estimated Cost

An approximation of the costs associated with a project or production, prior to actual expenditure.

Lower of Cost or Market (LCM)

Lower of Cost or Market (LCM) is an accounting principle requiring inventory to be recorded at the lower of its historical cost or current market value to reflect any decrease in the value of inventory.

Ending Inventory Costs

The total value of all the goods that a company has in stock at the end of an accounting period, before any adjustments or cost of goods sold calculations.