Consider the Case of a Simple One-Period Framework

question 32

Multiple Choice

Consider the case of a simple one-period framework.If i = 12.50%, k = 14.85%, p = 0.98, and g = 0.85 what is the required risk premium (round to two decimals) ?

• A)0.34%
• B)0.35%
• C)0.98%
• D)2.35%

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Definitions:

Spillovers

Effects of an economic activity that impact third parties who are not directly involved in the activity, potentially leading to externalities.

Marginal Cost

The added cost incurred from the production of an extra unit of output.

Total Revenue

The total amount of money generated by a business from the sale of goods or services before any expenses are subtracted.

Life Expectancy

The average number of years a person is expected to live based on demographic factors such as current age, gender, and geographic location, calculated from statistical data.