A Theory Used to Describe the Formal Choices of Performance

question 90

Short Answer

A theory used to describe the formal choices of performance measures and rewards.

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Definitions:

Cost of Capital

The rate of return required by a capital provider, whether debt or equity, to make an investment in a project, asset, or firm.

Risk Premium

The additional return expected by an investor for holding a risky asset instead of a risk-free asset.

Expected Return

The projected average amount of profit or loss an investment is anticipated to generate, based on historical performance or probability analysis.

Risk-Free Rate

Risk-free financial gains, usually signified by government securities' yields.