Payback Explicitly Considers the Time Value of Money

question 136

True/False

Payback explicitly considers the time value of money.

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Definitions:

Market Risk Premium

The additional return expected by investors for taking on the higher risk of investing in the stock market over a risk-free rate.

Beta

A measure of a stock's volatility in comparison to the overall market; a beta above 1 indicates greater volatility than the market.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, serving as a benchmark for measuring risk.

Security Market Line

A line that depicts the relationship between the expected return of a market security and its risk as measured by beta.