The Market Has an Expected Rate of Return of 9

question 111

Multiple Choice

The market has an expected rate of return of 9.8%.The long-term government bond is expected to yield 4.5% and Treasury bills are expected to yield 3.4%.The inflation rate is 3.1%.What is the market risk premium?

• A)2.2%
• B)3.3%
• C)5.3%
• D)6.4%
• E)6.7%

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Definitions:

Cash Inflows

Money or other forms of financial assets that come into a company, contributing to its total revenue.

Outlay

The total amount of money spent on a particular project or purchase.

Payback Period

The length of time needed to recoup the initial cost of an investment.

Cash Flows

The total amount of money being transferred into and out of a business, especially affecting liquidity and overall financial health.