Which One of the Following Would Be Considered a Risk-Free

question 54

Multiple Choice

Which one of the following would be considered a risk-free asset in real terms as opposed to nominal?

• A) Money market fund
• B) U.S. T-bill
• C) Short term corporate bonds
• D) U.S. T-bill whose return was indexed to inflation

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Definitions:

Required Rate of Return

The minimum expected yield by investors to compensate for the risk of holding a particular investment.

Beta

An indicator of how much the risk of a security or a portfolio, known as systematic risk, fluctuates in relation to the overall market.

Expected Rate of Return

This refers to the anticipated gain or loss of an investment, expressed as a percentage of the investment's initial cost.

Probability

A measure of the likelihood that an event will occur, quantified as a number between 0 and 1.