A Risk Premium Generated by Comparing Stocks to 10-Year U

question 19

True/False

A risk premium generated by comparing stocks to 10-year U.S. Treasury bonds will be smaller than a risk premium generated by comparing stocks to U.S. Treasury bills.

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Definitions:

Accounting Profits

The net income for a company determined by subtracting total expenses from total revenues, according to generally accepted accounting principles (GAAP).

Short Run

A period of time during which at least one factor of production is fixed, usually considered in economic models and analyses.

Long Run

A period of time in economics sufficiently long to allow for all inputs to production, such as plant and equipment, to be varied (as opposed to just the amount of labor or raw materials).

Total Loss

A situation in insurance where the cost of repairing a damaged property exceeds the property's value, making it economically unfeasible to repair.