The Market Has an Expected Rate of Return of 11

question 79

Multiple Choice

The market has an expected rate of return of 11.2 percent.The long-term government bond is expected to yield 5.8 percent and the U.S.Treasury bill is expected to yield 3.9 percent.The inflation rate is 3.6 percent.What is the market risk premium?

• A)6.0 percent
• B)7.3 percent
• C)7.6 percent
• D)8.5 percent
• E)9.3 percent

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Definitions:

Economy Will Produce

Refers to the total output of goods and services that an economy generates over a specific time frame.

Outside The Frontier

Referring to production or economic activity occurring at a level below the potential or efficient production frontier, indicating underutilization of resources.

Available Technology

Refers to the current set of tools, machinery, and methods that can be used to produce goods and services.

Inefficient Use

refers to the scenario where resources are not being utilized in the best possible manner, leading to waste or suboptimal outcomes.