How Much Would an Investor Need to Receive in Nominal

question 23

Multiple Choice

How much would an investor need to receive in nominal return if she desires a real return of 4 percent and the rate of inflation is 5 percent?

• A)4.20 percent
• B)8.64 percent
• C)9.00 percent
• D)9.20 percent 1.04 = 1 + nominal return/1.05

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Definitions:

Market Risk

Market risk, also known as systematic risk, refers to the potential for investors to experience losses due to factors that affect the overall performance of the financial markets.

Beta

A measure of a stock's volatility in relation to the overall market; a beta above 1 indicates that the stock's price is more volatile than the market.

Volatile

Refers to the degree of variation in the price of a financial instrument over a period of time, indicating the level of risk associated with it.

Standard Deviation

A statistical measure that represents the dispersion or variability of a dataset relative to its mean.