If the Future Return on a Security Is Known with Absolute

question 20

Multiple Choice

If the future return on a security is known with absolute certainty, then the risk premium on that security should be equal to:

• A)zero.
• B)the risk-free rate.
• C)the market rate.
• D)the market rate minus the risk-free rate.
• E)the risk-free rate plus one-half the market rate.

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Definitions:

Categorical Syllogism

Logical reasoning that draws a conclusion from two other premises, involving a set of three categories or terms.

Affirmative Premise

A statement within a logical argument that positively asserts a relationship or condition, contributing towards the conclusion.

Proposition

A formulated idea or plan suggested for acceptance; a plan of action.

Standard Form

A recognized format for presenting information or arguments in a structured and consistent manner.