The Market Risk Premium Is Computed By

question 79

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:

Crude Quantity Theory

A basic hypothesis regarding the relationship between the quantity of money in an economy and its level of prices.

Constant

A value that remains unchanged throughout the scope of an equation, analysis, or experiment.

PQ

A notation commonly used in economics to represent the product of price (P) and quantity (Q), indicating the total revenue.

GDP

Gross Domestic Product, the total value of all goods and services produced within a country in a given period.