The Risk-Free Rate of Return Is Equal to the

question 101

Multiple Choice

The risk-free rate of return is equal to the

• A)real rate plus a risk premium.
• B)required return minus the inflation premium.
• C)real rate plus the inflation premium.
• D)required return minus the real rate.

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Definitions:

Sunk Cost

A cost that has already occurred and that is not affected by the capital project decision. Sunk costs are not relevant to capital budgeting decisions.

Publishing Company

A business entity that specializes in the production and dissemination of literature or information, such as books, magazines, or digital content.

Analysis

The examination and evaluation of the relevant information to select the best course of action from among various alternatives.

Cash Flows

Cash flows refer to the net amount of cash and cash-equivalents being transferred into and out of a business.