Claus and Thomas (2001)use Forecasts by Security Analysts and Conclude

question 8

Multiple Choice

Claus and Thomas (2001) use forecasts by security analysts and conclude that the market risk premium is approximately:

• A)2% p.a.
• B)3% p.a.
• C)4% p.a.
• D)1% p.a.

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Definitions:

Slope of the Budget Line

The rate at which a consumer can trade off one good for another while maintaining the same level of utility, representing the relative prices of two goods.

Risk

The possibility of loss, damage, or any other undesirable event.

Return

The profit or loss derived from an investment over a particular period, expressed either in percentage or absolute terms.

Tradeoff

A decision situation that involves diminishing or losing one quality, quantity, or property of a set or design in return for gains in other aspects.