The Unexpected Return of an Asset Is The

question 49

Multiple Choice

The unexpected return of an asset is the:

• A) expected return minus the risk-free rate.
• B) realized return minus the expected return.
• C) risk-free rate minus the realized return.
• D) expected return minus the risk premium.
• E) expected return minus the realized rate.

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Definitions:

Present Value

The value today of a future lump sum or cash flow series, based on a given rate of return.

Effective Loan Rate

The actual cost of borrowing expressed as an annual rate, including interest, fees, and any other charges associated with the loan.

Future Value

The value of an investment or cash flow at a specified future date based on a certain interest rate.

Constant Dollar

An accounting method that adjusts financial statements for inflation, thereby allowing comparison of buying power across different periods.