Factor

question 14

Multiple Choice

Factor.

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Definitions:

Market Risk Premium

The additional return an investor expects to receive from a market portfolio over a risk-free rate due to the inherent risks.

Beta

In finance, beta is a measure of a stock's volatility in relation to the overall market; a higher beta indicates greater volatility and therefore higher risk and potential return.

Required Return

The minimum expected yield by investors to compensate for the risk of an investment.

Security Market Line

A representation in financial markets that depicts the relationship between the risk of an asset and its expected return.