The Real Rate of Return on a Stock Is Approximately

question 27

Multiple Choice

The real rate of return on a stock is approximately equal to the nominal rate of return:

• A)multiplied by (1 + inflation rate).
• B)plus the inflation rate.
• C)minus the inflation rate.
• D)divided by (1 + inflation rate).
• E)divided by (1 - inflation rate).

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Definitions:

Underwriter

A professional or company that assesses and accepts the risk of another party, often used in insurance and securities issuing.

Initial Public Offering (IPO)

The first sale of stock by a company to the public, marking the transition from a private entity to a public company.

Gross Spread

The difference between the underwriting expense of a security and the amount received from the selling group.