A Normal Rate of Return on Investment Is Equal to

question 229

Multiple Choice

A normal rate of return on investment is equal to

• A) accounting profit minus economic profit.
• B) the opportunity cost of capital plus any other implicit costs.
• C) accounting profit plus economic profit.
• D) total revenue plus total accounting profit

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Definitions:

Stripped Treasuries

Securities derived from U.S. Treasury bonds by separating the coupons from the principal, allowing them to be sold separately as zero-coupon bonds.

Pure Yield Curve

A theoretical representation of the rates of interest for zero-coupon bonds across different maturities under the assumption of no risk.

Coupon Bond

A type of bond that pays the holder a fixed interest rate (coupon) over its lifetime, and the principal amount is repaid at maturity.

Yield To Maturity

Yield to Maturity (YTM) is the total anticipated return on a bond if the bond is held until it matures, accounting for interest payments and principal repayment.