If the Future Return on a Security Is Known with Absolute

question 20

Multiple Choice

If the future return on a security is known with absolute certainty, then the risk premium on that security should be equal to:

• A)zero.
• B)the risk-free rate.
• C)the market rate.
• D)the market rate minus the risk-free rate.
• E)the risk-free rate plus one-half the market rate.

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Definitions:

Focal Plane

The specific distance at which the lens of a camera or microscope focuses light to form a sharp image.

Depth of Field

The range of distance within a photograph that appears acceptably sharp, influenced by the aperture, focal length, and distance from the subject.

Resolution

The process of reducing or separating something into its components or the clarity and detail of an image.

Field Diameter

The apparent size of an area visible through the microscope lens, often measured in millimeters or micrometers.