The Market Has an Expected Rate of Return of 10

question 75

Multiple Choice

The market has an expected rate of return of 10.29 percent.The long-term government bond is expected to yield 4.73 percent,and the U.S.Treasury bill is expected to yield 3.21 percent.The inflation rate is 3.09 percent.What is the market risk premium?

• A)7.20%
• B)9.73%
• C)6.78%
• D)8.33%
• E)7.08%

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Definitions:

Cannon-Bard Theory

A theory of emotion proposing that emotions and physiological responses like sweating or trembling happen simultaneously.

Two-Factor Theory

A psychological theory that posits emotions are based on physiological arousal and cognitive label.

Cognitive Appraisal

A process by which an individual evaluates and interprets a situation or event, determining its significance and the response it requires.

Physical Arousal

A physiological response of the body that prepares it for action, characterized by increased heart rate, breathing, and blood pressure, often triggered by stress, excitement, or exercise.