The Market Has an Expected Rate of Return of 12

question 51

Multiple Choice

The market has an expected rate of return of 12.8 percent.The long-term government bond is expected to yield 4.5 percent and the U.S.Treasury bill is expected to yield 3.4 percent.The inflation rate is 3.1 percent.What is the market risk premium?

• A)3.4%
• B)9.7%
• C)6.3%
• D)8.3%
• E)9.4%

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Definitions:

Depreciation

The accounting process of allocating the cost of a tangible asset over its useful life, reflecting wear and tear, age, or obsolescence.

Net Working Capital

The difference between a company's current assets and its current liabilities, indicating the short-term liquidity position.

Tax Rate

The rate designated by the state to collect taxes from the profits or income of individuals or firms.