The Expected Rate of Return from an Investment Is

question 174

Multiple Choice

The expected rate of return from an investment is

• A) the rate that compensates for time preference only.
• B) the rate that compensates for risk only.
• C) the rate that compensates for time preference plus the rate that compensates for risk.
• D) the rate that compensates for time preference minus the rate that compensates for risk.

---

Definitions:

Exercise Price

In options trading, it is the price at which the holder can buy (call option) or sell (put option) the underlying security.

Black-Scholes Model

A mathematical model used to price European-style options, evaluating their worth based on stock volatility, risk-free rate, and other factors.

Option Theta

A measure of the rate of decline in the value of an options contract due to the passage of time.

Underlying Asset

The financial asset upon which a derivative's value is based, such as stocks, bonds, commodities, or currencies.