The Risk-Free Rate of Return Is Composed of Which of the Following

question 2

Multiple Choice

The risk-free rate of return is composed of which of the following elements:

• A)risk premium and inflation
• B)cost of capital and risk premium
• C)real rate of return and risk premium
• D)real rate of return and inflation

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Definitions:

Borrow

To receive something from someone with the intention of returning it or its equivalent value at a later date.

Compounded Quarterly

The process of calculating and adding interest to a principal amount every quarter or three months, causing the principal to grow at an increasing rate.

RRSP

In Canada, the Registered Retirement Savings Plan serves as an investment and savings scheme aimed at providing for the retirement needs of employees and self-employed people.

Interest Earned

The amount of money generated as income on an investment, savings, or lending over a specified period.