The Expected Risk Premium on a Stock Is Equal to the Expected

question 75

Multiple Choice

The expected risk premium on a stock is equal to the expected return on the stock minus the:

• A) expected market rate of return.
• B) risk-free rate.
• C) inflation rate.
• D) standard deviation.
• E) variance.

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Definitions:

One-tailed Test

A statistical hypothesis test in which the region of rejection is on only one side of the sampling distribution.

α

Symbol often used to represent the level of significance in hypothesis testing, typically denoting the probability of making a Type I error.

Null Hypothesis

A statement or hypothesis that assumes there is no significant difference or effect, serving as the basis for statistical testing.

Level of Significance

The threshold chosen for determining whether a statistical result is significant in hypothesis testing, typically set at values like 0.05, 0.01, etc.