The ________ Is an Additional Return Beyond the Risk-Free Rate

question 67

Multiple Choice

The ________ is an additional return beyond the risk-free rate that investors require to compensate them for the additional risk.

• A) additional premium
• B) risk premium
• C) specific return
• D) nominal return

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Definitions:

Net Present Value

The difference between the present value of cash inflows and outflows over a period of time, used in capital budgeting to assess the profitability of an investment.

Cost of Capital

The required return necessary to make a capital budgeting project, such as building a new plant, worthwhile.

Cash Inflows

The total amount of money coming into a business from its various activities, including sales, investments, financing, and more.

Internal Rate

Typically refers to the internal rate of return (IRR), a discount rate that makes the net present value (NPV) of all cash flows from a project or investment equal to zero.