In the Equation $R \cdot p _ { s } = \text { dividend } + \Delta p _ { s }$

question 68

Multiple Choice

In the equation $R \cdot p _ { s } = \text { dividend } + \Delta p _ { s }$ , the left side of the equation is:

• A) equal to zero, if the real interest rate equals the user cost of capital
• B) the holding cost of the stock
• C) the return from a stock
• D) the return on a bank account
• E) equal to the marginal product of capital

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Definitions:

Total Risk

The complete range of risk associated with an investment, including both systematic and unsystematic risk.

Risk Premium

The additional return an investor demands for taking on a higher risk compared to a risk-free asset, indicating the compensation for bearing extra risk.

Principle of Diversification

A risk management strategy that mixes a wide variety of investments within a portfolio to minimize risks.

Efficient Market

A financial market theory stating prices fully reflect all available information, making it impossible to consistently achieve higher returns.