The Market Risk Premium Is Computed By

question 83

Multiple Choice

The market risk premium is computed by:

• A)adding the risk-free rate of return to the inflation rate.
• B)adding the risk-free rate of return to the market rate of return.
• C)subtracting the risk-free rate of return from the inflation rate.
• D)subtracting the risk-free rate of return from the market rate of return.
• E)multiplying the risk-free rate of return by a beta of 1.0.

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Definitions:

Normal Curve

A symmetrical, bell-shaped curve that represents the distribution of many physical and psychological attributes.

Distribution

The act of sharing something out among a number of recipients, or the way in which something is spread or dispersed.

Regression Toward

Implies the statistical concept that extreme scores tend to fall back (regress) toward the mean (average) over time.

Mean

In statistics, the average value in a set of numbers, calculated by adding all the numbers and dividing by the total count of values.