The Risk Premium Is Computed by ________ the Average Rate

question 14

Multiple Choice

The risk premium is computed by ________ the average rate of return for an investment.

• A)subtracting the inflation rate from
• B)adding the inflation rate to
• C)subtracting the average return on U.S.Treasury bills from
• D)adding the average return on U.S.Treasury bills to
• E)subtracting the average return on long-term government bonds from

---

Definitions:

Regression Analysis

A statistical method used to model and analyze the relationships between a dependent variable and one or more independent variables.

Coefficient of Determination

A statistical measure, indicated by R², that shows the proportion of variance in the dependent variable predictable from the independent variable(s).

Goodness of Fit

A statistical measure that indicates how well observed data correspond to the expected outcome under a specified model.

Direct Cost

Expenses that can be directly traced to the production of specific goods or services, such as raw materials and labor.