Which of these factors influences the returns required by investors from an investment project?

Question

Quizplus · Accepted Answer

All of the factors listed (inflation, risk premium, and interest foregone) can influence the returns required by investors. Inflation can increase the required returns because investors demand compensation for the eroding value of their money over time. Risk premium reflects the additional compensation investors require for taking on risk. Lastly, interest foregone represents the opportunity cost of investing in one project versus another or choosing to invest versus holding cash.

Which of These Factors Influences the Returns Required by Investors