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The consumer decision process begins with
Required Rate of Return
The required rate of return is the minimum expected return an investor demands for holding a risky investment, compensating for the risk taken.
Beta
A measure of a stock's volatility in relation to the overall market, used in the capital asset pricing model to determine expected returns.
Market Risk Premium
The extra earnings an investor foresees from holding a risky market portfolio in comparison to risk-free assets.
Risk-Free Rate
The theoretical return on investment with no risk of financial loss, typically represented by the yield on government bonds like U.S. Treasury securities.
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