You estimate that an investment of yours has generated a nominal rate of return of 14% p.a. Over that same period of time, inflation has increased at a rate of 4% p.a. Which of the following is closest to your real rate of return p.a.? Group of answer choices 9.62% 17.52% 11.76% 8.65%

You estimate that an investment of yours has generated a nominal rate of return of 14% p.a. Over that same period of time, inflation has increased at a rate of 4% p.a. Which of the following is closest to your real rate of return p.a.? Group of answer choices 9.62% 17.52% 11.76% 8.65%

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section7.6: Valuing Nonconstant Growth Stocks

Problem 3ST

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Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

Group of answer choices

9.62%

17.52%

11.76%

8.65%

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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