Which of the Following Statements Is Correct

question 113

Multiple Choice

Which of the following statements is correct?

• A)NASDAQ is an important stock exchange in the United States.
• B)The demand for a corporation's stock is largely based on people's perception of the corporation's profitability in the future.
• C)Compared to the Standard & Poor's 500 Index,the Dow Jones Industrial Average incorporates the stock prices of a much smaller number of corporations.
• D)All of the above are correct.

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Definitions:

Default Risk Premium (DRP)

The additional yield that investors demand for holding a bond that has a risk of default over a risk-free bond.

Liquidity Premium (LP)

Additional return that investors demand for holding an asset that is not easily convertible to cash without a loss in value.

Real Risk-free Rate

The return on an investment with no risk of financial loss, adjusted for inflation.

Inflation Premium

The part of the nominal interest rate that represents compensation to the lender for the loss of purchasing power due to inflation.