The nominal risk-free rate of interest is a function of the Select one: c A. real risk-free rate and the investment's variance. 。 B. real risk-free rate and the rate of inflation. c C. tax-free rate plus the rate of inflation. D. T-note rate plus the inflation rate.
The nominal risk-free rate of interest is a function of the Select one: c A. real risk-free rate and the investment's variance. 。 B. real risk-free rate and the rate of inflation. c C. tax-free rate plus the rate of inflation. D. T-note rate plus the inflation rate.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:The nominal risk-free rate of interest is a function of the
Select one:
A.
real risk-free rate and the investment's variance.
B.
real risk-free rate and the rate of inflation.
C.
tax-free rate plus the rate of inflation.
D.
T-note rate plus the inflation rate.
Which of the following statements is true?
Select one:
A.
The only way to maintain purchasing power over time is to invest in bonds.
B.
An asset allocation decision for a taxable portfolio that does not include a substantial
commitment to ordinary shares may make it difficult for the portfolio to maintain
real value over time.
C.
Except for tax-exempt investors and tax-deferred accounts, annual tax payments
increase investment returns.
O
D.
After adjusting for taxes, long-term bonds consistently outperform shares.
Transcribed Image Text:Return on risk-free asset = 4.5%
Expected return for asset i = 12.75%
Expected return on the market portfolio = 9.25%
Calculate the risk premium for asset i.
A.
3.50%
B.
8.25%
C.
4.50%
D.
4.75%
The annual rates of return of Share Z for the last four years are 0.10, 0.15, -0.05, and 0.20.
Compute the arithmetic mean annual rate of return for Share Z.
Select one:
A.
0.04
B.
0.06
C.
0.03
O
D.
0.10
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