The Risk Premium That Is Offered on Common Stock Is

question 5

Multiple Choice

The risk premium that is offered on common stock is equal to the:

• A) expected return on the stock.
• B) real rate of return on the stock.
• C) excess of expected return over a risk-free return.
• D) expected return on the S&P 500 index.

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Definitions:

Gain on Sale

The financial profit realized when the selling price of an asset exceeds its book value or costs at the time of sale.

AASB 107/IAS 7

Accounting standards that set out the requirements for entities to present statements of cash flows, classifying cash flows during the period from operating, investing, and financing activities.

Statement of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, categorizing cash activities into operating, investing, and financing activities.

Cash Equivalents

Short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.