Since the Market Return Represents the Expected Return on an Average

question 101

True/False

Since the market return represents the expected return on an average stock, the market return reflects a certain amount of risk.As a result, there exists a market risk premium, which is the amount over and above the risk-free rate, that is required to compensate stock investors for assuming an average amount of risk.

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Definitions:

Marginal Revenue

The extra revenue produced by the sale of an additional unit of a product or service.

Relatively Elastic

A characteristic of a good or service with a demand that is sensitive to changes in price, meaning that small changes in price lead to larger changes in quantity demanded.

Marginal Revenue

The surplus earnings obtained from the sale of one extra unit of a product or service.

Total Revenue

The overall income generated by a business from its sales activities, calculated by multiplying the price of goods by the quantity sold.