The Discount Rate Is a Rate That a Typical Investor

question 37

Multiple Choice

The discount rate is a rate that a typical investor would normally require as a(n) ________ return over investment holding period.

• A)Maximum
• B)Risk free
• C)Expected
• D)Historical

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Definitions:

Upper Bound

The maximum limit or highest achievable level of a particular measurement.

Call Option

A contractual arrangement providing the holder with the privilege, yet not the compulsion, to acquire an asset such as a stock, bond, or commodity, at a predetermined price during a defined period.

Interest Rate

An interest rate is the percentage of principal charged by the lender for the use of its money, or the rate earned on deposited funds.

Futures Contracts

Legally binding arrangements to engage in the buying or selling of a designated financial asset or commodity at a price established in advance, to be executed at a designated future time.