The Average Expected Rate of Return of a fiNancial Asset

question 58

Multiple Choice

The average expected rate of return of a financial asset equals

• A) the rate that compensates for time preference plus the rate that compensates for risk.
• B) the rate that compensates for time preference plus the rate of inflation.
• C) beta plus the rate that compensates for risk.
• D) the risk-free interest rate plus the rate of inflation.

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Definitions:

Consumers

Individuals or groups that purchase goods and services for personal use.

Pencil Sharpeners

Devices used to sharpen pencils by shaving away their worn surfaces.

Total Surplus

The combined benefit to all parties involved in a transaction, equal to the sum of consumer and producer surplus.