Explain the following three variables which influence the overall rate of return on alternative investments: The real risk-free rate of return The nominal risk-free rate of return The risk premium on the investment

Explain the following three variables which influence the overall rate of return on alternative investments: The real risk-free rate of return The nominal risk-free rate of return The risk premium on the investment

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter14: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 8LTAI

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Question

Explain the following three variables which influence the overall rate of return on alternative investments:

The real risk-free rate of return
The nominal risk-free rate of return
The risk premium on the investment

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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