Is the Realized Rate of Return Related to the Expected

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Examlex · Accepted Answer

The Answer is Yes and no. The required return determines the initial size of the coupon and the offer price and,as the r changes,forces the market price to change. As the buy and sell prices and reinvestment rates on coupons change,the realized return will be affected. However,the required return is an ex-ante rate designed to compensate investors for risk. The realized return may be less than or more than the expected or the required. That is the nature of risk. If you repeated the same investment with the same terms over and over,you should,on average,earn a realized return equal to the required return.

Is the Realized Rate of Return Related to the Expected

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