The First Step in the Risk-Based Approach to Estimating a Security's

question 41

Multiple Choice

The first step in the risk-based approach to estimating a security's expected return is to:

• A) define what is meant by "risk" and to measure it.
• B) quantify how much return we should expect on an asset with a given amount of risk.
• C) estimate the risk-free rate.
• D) define what is meant by return.

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Definitions:

Demand

The quantity of a product or service that consumers are willing and able to purchase at various prices during a certain period of time.

Demand

The quantity of a product or service that consumers are willing and able to purchase at various price levels at a given time.

Price

The monetary amount anticipated, imperative, or tendered in exchange for something.

Price-discriminating Monopolist

A monopolist that charges different prices to different consumers or groups of consumers for the same product or service, to maximize profit.