The Difference Between the Expected (Or Required) Return for the Market

question 11

Multiple Choice

The difference between the expected (or required) return for the market portfolio and the risk-free rate of return is referred to as:

• A) beta.
• B) the geometric mean.
• C) the market risk premium.
• D) the arithmetic mean.

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Definitions:

Accounts Receivable

Represents money owed to a company by its customers for goods or services delivered but not yet paid for.

Indirect Method

A way of calculating cash flows for operational activities by starting with net income and adjusting for non-cash transactions.

Net Income

The total profit of a company after all expenses, including taxes and interest, have been deducted from revenues.

Direct Method

A method of preparing the cash flow statement where actual cash flow information from the company’s operations segment is used directly.